Selling rental house and buying vacant land - ROLLOVER tax deferral - NO!!!

My question is: Canadian-specific

QUESTION: We have had a rental home for a couple of years and we are selling it.  We understand if you buy another investment property within 6 months you don't pay the capital gains taxes.  Can we buy an undeveloped lot and will it be viewed as an investment property and thus be able to avoid paying the taxes?  Thanks.

david ingram replies:

Such a rule does not apply UNLESS the property was expropriated by a government authority for a common cause such as a road or even in a couple of cases, a parkling lot for the Burnaby Library amd a parkling lot for the Municipal works yard in Maple Ridge or as is happening right now, the expropriatioon of some 172 houses for the new Greater Vancouver Ring Road.

If ruled a capital gain 50% of any gain on the sale is taxable on line 127 of your T1 Canadian tax return.

And if you were being expropriated, buying vacant land with the proceeds of a rental house would not qualify.  It must be the same kind of property.
An exception which DOES qualify is if the sale is for the business property of an 'active' business.  Therefore if a service station owner (who was operating the service station) sold his property and bought another service station to operate his business, he would qualify for a capital gains roll-over.  However, if he moved out and rented the property for a year and then sold it and bought another station, it would not qualify because it has to be used in his active business and rental property is not considered active UNLESS

there are five full time employees not related to the owners.