Quote:
Originally Posted by brentwood
More in response to Tall Drink's recent posts than that of Cage, but as usual with any tax issues it really is a lot more complex than at first sight regarding secondary suites. It is likely beyond the scope of the discussion but for those really interested, Canada Revenue Agency's IT-120R6 "Principal Residence" might be worth reading. (IT = Income Tax Interpretation Bulletin)
An excerpt:
"¶ 32. It is our practice not to apply the deemed disposition rule, but rather to consider that the entire property retains its nature as a principal residence, where all of the following conditions are met:
(a) the income-producing use is ancillary to the main use of the property as a residence,
(b) there is no structural change to the property, and
(c) no CCA is claimed on the property.
These conditions can be met, for example, where a taxpayer carries on a business of caring for children in his or her home, rents one or more rooms in the home, or has an office or other work space in the home which is used in connection with his or her business or employment."
Again, not to bore everyone but I thought the issue deserved a response. It is clearly not as black and white as Cage previously indicated.
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Good catch on IT-120R6.
Couple of counter points.
1) Changes to bring secondary suites up to provincial code (including a separate entrance, fire code improvements, set up for separate kitchen, etc.) would likely remove the "principle residence" option.
2) IT-120R6 was primarily designed such that principle residence did not get removed when some one rents out a bedroom. Example is a parent who lets their early 20s kid stay at home but charges $300 rent. In this instance no changes to the house need to occur and the rent is ancilliary to houshold.
3) IT-120R6 might not apply to a situation where the secondary suite alters the structure of the house through second kitchen and other facilities, separate entrance, additional parking spot, plus 10x10 outdoor ammenity space. The total square footage of the suite, ammenity space, and parking spot could approach 40% of property square footage, which could invalidate the ancilliary use provision of IT-120R6.
4) Interpretation bullitens are non binding on CRA and do not carry the same wieght as Income Tax Act and Regulations or Federal Tax Court cases.
In the past CRA has not gone after secondary suite homeowners (average Joes), however with the recent introduction of Secodnary Suite policies in Canada's major cities, I think its only a matter of time before a precedent settign case winds up at Federal Tax Court.
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