Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether a duplex qualifies as a principal residence for purposes of the exemption under paragraph 81(1)(h).
Position: Only one unit of the duplex qualifies.
Reasons: A taxpayer's "place of residence" may be defined as the place where the taxpayer regularly, normally or customarily lives. The term "principal" means chief or main, and thus is only relevant in the phrase "principal place of residence" where an individual has more than one place of residence. Under these definitions, only one unit in a duplex would ordinarily qualify as a taxpayer's "principal place of residence". The fact that the duplex units are closely linked does not changes this.
XXXXXXXXXX J. Gibbons
5-991689
Attention: XXXXXXXXXX
August 20, 1999
Dear XXXXXXXXXX
This is in response to your facsimile of June 15, 1999, in which you requested our views on the application of paragraph 81(1)(h) of the Income Tax Act to the particular situation outlined in your letter.
As indicated in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996, a request for a written opinion on a completed transaction is generally considered by a taxpayer's local tax services office. Accordingly, you may wish to submit all relevant facts and documentation to the appropriate Tax Services Office for their comments. However, we have provided some general comments below.
Facts
1. The individual taxpayer, "Mrs. X", entered into a contract to provide residential care to mentally and physically disabled individuals.
2. The contract is between the guardians of the disabled individuals, the service provider (i.e.. the "taxpayer") and a non-profit organization "NPO."
3. It appears that social assistance payments are received by the NPO and the NPO remunerates the taxpayer for services provided.
4. The taxpayer provides the following services (a partial list as outlined in the contract):
a) Supervision, support and skill development opportunities for the disabled persons.
b) Provides personal skill development opportunities as requested by the guardians of the disabled persons.
c) Provides in-home support in accordance with set hours of supervision.
d) Participates in the planning and implementation of various "service plans" for the disabled individuals.
e) Provides various record keeping as required by the NPO regarding the disabled individuals.
f) Arranges for alternate supervision to the extent that the taxpayer is absent from the home for extended periods.
g) Assists the disabled individuals with payments in a timely fashion of all rents, utilities and various other monthly maintenance costs.
h) Ensures that any complaints of illness, accident or injury are treated immediately.
i) Ensures that any emergency situations are planned-for and that the necessary steps are taken to remedy the emergency.
5. In plain English, further to the responsibilities outlined above, Mrs. x is responsible for all cooking, cleaning, curfews, laundry, household chores, maintenance, hygiene and discipline regarding the disabled individuals. This is necessary since the disabled individuals do not have the mental capacity to carry out these functions on their own.
6. The taxpayer receives approximately $2,000 per month per disabled individual that is in her care.
7. The taxpayer and her husband jointly own a duplex residence. In other words, the taxpayer's principal residence is one half of a housing unit which has two separate entrances. The taxpayer presently rents out the other half of the duplex unit to the disabled individual as part of the contract with the NPO.
8. The rental income collected by the taxpayer is in addition to the remuneration as outlined in number 4 above.
9. The taxpayer needs easy access to the duplex unit that is rented to the disabled individuals. This is necessary due to the nature of the services that are required to be provided by the taxpayer. Accordingly, the taxpayer has joined the living dining area of the duplex units by installing an internal entrance way in order for the taxpayer and disabled individuals to function as a family unit.
You want to know whether the Department will consider the duplex unit, as described above, as the taxpayer's principal place of residence for purposes of paragraph 81(1)(h).
A taxpayer's "place of residence" may be defined as the place where the taxpayer regularly, normally or customarily lives. The term "principal" means chief or main, and thus is only relevant in the phrase "principal place of residence" where an individual has more than one place of residence. Under these definitions, only one unit in a duplex would ordinarily qualify as a taxpayer's "principal place of residence". The question becomes whether the fact that the duplex units are closely linked changes this. In our view, it does not.
An issue similar to yours was considered in ~aspar Mitosinka V. The Minister of National Revenue, 77 DTC 13. In that case, the issue was whether both units of a closely-linked "duplex" could be considered a "principal residence" for purposes of the principal residence exemption in paragraph 40(2)(b). In Mitosinka, there was an interior partition dividing the house in two, but both sides could communicate from their respective kitchens and enter the other premises via the basement. Also, there was a little window in the kitchen, so that both families could use the common telephone and also could speak directly to each other. In deciding against the taxpayer, Collier, J., made the following comments.
While the building was not quite a duplex in its construction, it served, to my mind, the same practical function. It could, and did, house separate families, who had separate facilities, and paid for separate services. Paragraph 54(g) uses the expression "housing unit". The portion of the building ordinarily inhabited by the defendant and his family was, in my opinion, one housing unit. The portion ordinarily inhabited by his tenant was another housing unit. The first housing unit was the defendant's principal residence. The other housing unit was not.
We trust that these comments will be of assistance
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1999
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1999
Email this Content