HOUSE FLIPPING & BRIEF OCCUPANCY

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HOUSE FLIPPING & BRIEF OCCUPANCY

TCC FINDS TWO RENOVATED HOMES HELD AS INVENTORY – NOT RESIDENCES

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As we have noted before (here and here), the Canada Revenue Agency (“CRA”) continues to audit residential homeowners who build or substantially renovate homes for resale, regularly assessing them as “builders” liable to pay GST/HST.

A recent decision of the Tax Court of Canada (“TCC”) in Salehi v. The King, 2026 TCC 139 (“Salehi”) is another case highlighting the problems that serial home renovators can face, even when claiming to have carried on renovations for their own personal use.

Self-Supply

Under the “self-supply” rules in the Excise Tax Act (“ETA”), a home purchaser or builder who constructs or renovates a residential property can be considered to be a “builder” liable to self-assess and remit GST/HST on the property’s fair market value.

The ETA provides an exception from that requirement where the home was used, among other conditions, “primarily as a place of residence” of the builder (or a relative). However, as recent case law shows, that standard can be a high bar, particularly for those who have only briefly resided at the property in question.

Salehi Case

Salehi involved an individual who built and sold two homes in Toronto in quick succession (“the Appellant”). The Appellant purchased a property together with a relative and built two homes, one of which he claimed to occupy for 3 months before selling it for a profit (the “First Home”). The relative sold the other home at the same time. Shortly after those sales, the Appellant purchased a second property in his mother’s name and proceeded to construct another new home (“Second Home”). While initially intended as a home for the Appellant’s parents, the Second Home was sold to a corporate purchaser immediately upon completion, without anyone moving in. The purchase price was HST-inclusive if applicable.

The CRA assessed the Appellant as a “builder” of both Homes, liable to remit GST/HST in respect of each. The Appellant appealed.

TCC Decision

At the TCC, the Court found that, among other factors, the short period of ownership, premature changes of address to those of the Homes long before completion and unconvincing explanations for their sales – including a foreign currency decline and a family conflict – indicated the Appellant was a builder.

In considering whether the exception for “personal use” applied, the TCC found that inconsistencies in the Appellant’s testimony and evidence that the First Home lacked hot water until it was sold suggested that the Appellant’s occupancy was merely “window dressing,” rather than genuine residence.

Despite the purchaser of the Second Home being a GST-registered corporation, which would generally shift the burden of remitting the tax to the recipient, the TCC found that the “HST inclusive price if applicable” term, left the Appellant responsible for collecting and remitting the tax on sale.

Takeaways

Salehi confirms that Courts may look past brief occupancy to the full pattern of conduct when considering whether a newly constructed property meets the GST/HST exception for personal use.

Experienced Indirect Tax Counsel can help.

For help with a CRA Home Builder Assessment, please click here.