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HOUSE FLIPPING & SALES HISTORY

TCC FINDS HOUSE HELD AS INVENTORY DESPITE OCCUPANCY

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As we blogged about here, the CRA continues to pursue homeowners and builders who buy, renovate or construct, and resell residential properties, often finding them liable to collect and remit GST/HST as “builders” under the Excise Tax Act (“ETA”).

A recent decision of the Tax Court of Canada (“TCC”) in Caddell v. The King, 2026 TCC 27 (“Caddell”) continues this trend, and shows the difficulties for serial home builders trying to rely on the “personal use” exemption from the GST/HST self-supply rules, even where they briefly lived in the home before selling it.

Self-Supply

As discussed in our earlier blog, the Excise Tax Act’s (“ETA”) self-supply rules can turn a home purchaser or builder who constructs or substantially renovates a residential property into a “builder”, liable to self-assess and remit GST/HST on the property’s fair market value, as though the builder had sold the home to itself.

The ETA does provide 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 renovated and sole multiple properties in the past.

Caddell Case

Caddell involved a couple (the “Appellants”) who, over 11 years, purchased seven residential properties and sold five of them, typically buying bare land, building a home, occupying it briefly, and then seemingly selling it at a substantial profit. The Appellants were assessed by the CRA on the construction of their third such property, which was owned for 2 years and occupied for six to eleven months before being listed for sale. The property was sold for nearly $790,000 over the purchase price and the stated reason for the sale was the undesirable layout of the home, including the distance between the toddler room and the master bedroom.

TCC Decision

At the TCC, the Appellants argued that they were not “builders”, and that in any event, the personal use exception applied because the home had served as their family residence. Applying the legal framework under the ETA, the Court rejected the Appellants’ stated reason for sale given their knowledge of the floorplans during construction. Accordingly, the TCC held them to be builders.

On the personal use exemption, the Court held that a “secondary intention to resell” does not include a primary intention to sell for profit. Given their extensive history of home constructions, the primary use of the property was found to be inventory, not residence, notwithstanding the Appellants’ brief occupancy.

Takeaways

Caddell adds a further layer to the developing jurisprudence regarding “dual motivations” in the construction of homes. Brief occupancy of a self-built home will not necessarily satisfy the exception for personal use where a consistent pattern of construction and resale suggests the real purpose was profit.

Those who build, renovate, or flip residential properties should get professional advice before assuming their next project is GST/HST-exempt.

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