The principal residence exemption gives you an exemption on the sale of your home, one per family, and it's limited to Canadian residents. If you sell your home partway through the year, you'll most likely buy a new home if you're moving, so you will have had two principal residences in that year. As I said, you can only have one principal residence at a time. To get around that problem, where you don't want to preclude the principal residence exemption just because you moved, the rules give you a plus-one year. They say that we'll take a look at when you own the house and we will give you a year on it to take into account situations where you move.
A technical issue arose when a non-resident engaged in certain planning and bought and sold a Canadian house or real property. There was an argument that they could claim the principal residence exemption for that one year just because of that plus-one year that was given in order to make sure the rules worked for Canadians who moved from Toronto to Ottawa, let's say. That's an example of what might be called a loophole.