PRINCIPAL RESIDENCE EXEMPTION (P.R.E.)
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In a November 9, 2005 Tax Court of Canada
case, the taxpayer was a contractor
who acquired land and constructed a
home in Niagara Falls which was sold two
and one-half years later at a gain of
$32,000 for which the taxpayer claimed
the P.R.E. and the GST new housing rebate.
Both were disallowed by CRA on the basis
that the property was inventory acquired
with the intention of resale.
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| Taxpayer Wins! |
The Court noted that, even though the
individual was a contractor, the primary
intention was to build a residence for his
family which was very specific to their
individual taste and needs.
Therefore, the P.R.E. and the GST new
housing rebate were allowed.
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| AGRICULTURAL LAND RESERVE |
In an October 25, 2005 External
Technical
Interpretation,
CRA
notes that
where a
residence is on an agricultural land reserve
which cannot be subdivided and has
been used on a continuous basis for thehome, these are very strong factors to
indicate that the entire property is eligible
for the principal residence exemption
even though it is in excess of one-half
hectare.
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| SHARE OF BANKRUPT/INSOLVENT CORPORATION |
In a November 24, 2005 External Technical Interpretation, CRA notes that a taxpayer may elect to claim a loss on shares where the corporation:
(i) becomes Bankrupt during the year;
(ii) is under a Winding-Up Order; or
(iii) is insolvent,
and neither the corporation nor a corporation controlled by it carries on business, the fair market value of the shares is nil and it is reasonable to expect that the corporation will be dissolved or wound-up.
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