Which of the following properties could qualify for the principal residence exemption from capital gains tax?
Correct Answer
B) The home where the taxpayer ordinarily lives throughout the year
Under the Income Tax Act definition in s. 54, a principal residence must be a housing unit owned by the taxpayer and ordinarily inhabited in the year by the taxpayer, a spouse or common-law partner, a former spouse or partner, or a child, and it must be designated. The home the taxpayer lives in qualifies; a vacant lot has no housing unit, and a rental house the taxpayer never lived in or a commercial building is not ordinarily inhabited by the family.
Why This Is the Correct Answer
This is correct because the taxpayer owns the home and ordinarily inhabits it, which meets the s. 54 definition of principal residence once it is designated for the years in question.
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