Tax Court of Canada


Written separation agreement was required to permit principal residence designation

Taxpayer passed away in 2005. Taxpayer purchased property in Whistler in 1976. Taxpayer transferred property to husband in 1991 for one dollar, but did not report disposition. Husband sold property in 2003 for $350,000. Gain of property was attributed to taxpayer. For 2003 tax return, taxpayer had not claimed property as her principal residence. Husband passed away in 2011, and had other property designated as principal residence from 1992 until his death. Assessment for 2003 was completed in 2013 and Minister refused to designate Whistler property as taxpayer’s principal residence for reason that another family member had made principal residence designation in respect of another property for same time period. Minister calculated capital gain of $243,009 was made in disposition and was attributed to taxpayer pursuant to s. 74.1(1) of Income Tax Act (Can.). Trustee testified that taxpayer and her husband separated in 1983, and son stated that taxpayer did not live at property and that property was family vacation property. No written separation agreement was found. Estate appealed. Appeal dismissed. Written separation agreement was required by Act and was requirement in circumstance. If taxpayer was still married only one of taxpayer and spouse could designate property as principal residence except if taxpayer and spouse were separated under written separation agreement pursuant to s. 54(c) of Act.

Balanko Estate v. R. (Mar. 19, 2015, T.C.C. [Informal Procedure], Gerald J. Rip J., File No. 2014-3116(IT)I) 250 A.C.W.S. (3d) 526.

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