The taxpayer sold his six-acre rural property after it was rezoned for residential use as a result of an application made on behalf of owners of adjacent properties. The taxpayer argued that the whole of the six acres was eligible for the principal residence capital gains exemption: when he bought the property, it could not be further subdivided; accordingly, the entire property was "necessary to the use and enjoyment" of the residence.
Favreau J. found that the taxpayer's exemption was limited, in accordance with paragraph (e) of the principal residence definition, to a half-hectare that included the house. The determination under paragraph (e) is to be made at the time of disposition of the property, and at that time the taxpayer's premise, that subdivision was impossible, was no longer correct.