Is the sale of a multi-generational house taxable considering the fact that it includes more than one dwelling?
Intergenerational homes are becoming increasingly popular, and as they have more than one dwelling, is their resale subject to taxation?
A couple purchases, in a single sales transaction, two semi-detached bungalows built on a single lot. They move in with their two children. An opening between the two bungalows allows family members to access them without having to go outside. Six years go by. The couple subdivides the property into two lots and sells the bungalows separately. The Revenu Québec agency, considering that the residence consists of two separate housing units, assesses the couple for over $29,000. The couple appeals to the Court and argues that they are exempt from capital gains since it was their principal residence. The couple bases their claims on the following:
- the property was never offered for rent;
- the entire house was used for family purposes;
- there is only one tax account;
- only one home insurance policy was issued for both units.
The court, in response to the arguments presented by both parties, bases its decision on the following:
- every taxpayer is exempt from capital gains tax on their principal residence;
- the existence of two addresses does not exclude the concept of a principal residence;
- the tax law, although it does not define intergenerational homes, considers them in an interpretive bulletin as a single dwelling, as long as there is no restricted access between the two living spaces;
- the residence can be sold under two contracts even if it was acquired under a single contract;
- there is nothing preventing the property from having more than one kitchen, as it could accommodate a domestic worker.
The Court ruled in favor of the taxpayers because, despite the existence of certain facts, they managed to demonstrate their rights. As Flaute said, "the facts speak for themselves".
*CA 700-80-005176-117
