Defining a family unit for the principal residence exemption

A reader wrote to ask about this principal residence exemption-related income tax folio, which states:

2.13 For a property to be a taxpayer’s principal residence for a particular year, he or she must designate it as such for the year and no other property may have been so designated by the taxpayer for the year. Furthermore, no other property may have been designated as the principal residence of any member of the taxpayer’s family unit for the year. For purposes of the latter rule, which applies if the taxpayer is designating a property as his or her principal residence for 1982 or a subsequent year, the taxpayer’s family unit for the year includes, in addition to the taxpayer, the following persons (if any):

the taxpayer’s spouse or common-law partner throughout the year, unless the spouse or common-law partner was throughout the year living apart from, and was separated under a judicial separation or written separation agreement from, the taxpayer;
the taxpayer’s children, except those who were married, in a common-law partnership or 18 years of age or older during the year; and
where the taxpayer was not married, in a common-law partnership or 18 years of age or older during the year:
- the taxpayer’s mother and father; and
- the taxpayer’s brothers and sisters who were not married, in a common-law partnership or 18 years of age or older during the year. [emphasis added]

The reader is wondering how to define the family unit, saying, “My sister, mother and I are all unmarried adults (and neither my sister nor I have children). Are we only permitted one PRE amongst the three of us or are we each permitted our own PRE?”

Keith Masterman, vice-president, Tax, Retirement and Estate Planning at CI Investments, says the answer depends on whether or not the reader lives with the family members mentioned, since a residence must be ordinarily inhabited during the year by a family member to qualify for the PRE.

The tax folio, however, defines a family unit for an unmarried/unpartnered, childless adult taxpayer as only that taxpayer, says Masterman. In other words, the third bullet in 2.13 only applies to minors.

As always, readers should obtain personalized tax advice for their own situations.

Also read:

Pitfalls with the Principal Residence Exemption

Answer client questions about the Principal Residence Exemption and trusts

Determining property value for the PRE