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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.

    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.

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.

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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