The judge reviewed the usual criteria which sometimes can allow a piece of property greater than a half hectare to qualify for the PRE. Thus, the only issue before the court was whether the piece of land sold was actually necessary for the use and enjoyment of the housing unit as a residence. The CRA disagreed and reassessed the taxpayer, adding a taxable capital gain of nearly $50,000 to her income for 2012, maintaining that the “disposition of 1.47 acres of land immediately contiguous to the housing unit was in excess of half a hectare and that excess did not contribute to the use and enjoyment of the housing unit as a residence,” as required by the statute. She argued that the woodlot sold was “the main source of wood used to heat (her) house” and thus was integral to her use and enjoyment of the property. Needless to say, she did not report the capital gain on her return, maintaining that the PRE should apply. She received $100,000 for this piece of land which she had acquired in 1986 for $500. The property sold was a woodlot representing 33 per cent of the second lot. In July 2012, the taxpayer sold 1.47 acres of the property to the local municipality for the expansion of the municipal aqueduct. The other three pieces of land, ultimately merged to form a second lot, were used to build a pool, a barn, a garage, a septic field and a sugar shack. Her housing unit was located on the land acquired in the first transaction. Article contentīetween 19, the taxpayer purchased four adjacent pieces of land in rural Quebec, in four separate real estate transactions, amassing a total of approximately 4.17 acres. This advertisement has not loaded yet, but your article continues below. The CRA denied the PRE and assessed capital gains tax, which is why the matter wound up in court. This “half-hectare rule” was the subject of a recent tax case in which the taxpayer attempted to claim the PRE on the 2012 sale of a portion of her property. The statutory definition of “principal residence” limits the amount of land that qualifies for the exemption to half a hectare (one hectare contains 2.47 acres) unless the taxpayer can show that the excess land was necessary for the use and enjoyment of the housing unit. Note that a seasonal residence, such as a cottage, cabin, lake house or even ski chalet can be considered to be “ordinarily inhabited in the year” even if you only use it during vacation periods “provided that the main reason for owning the property is not to gain or produce income.”
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