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TCC: NEW HOUSING REBATES & SOCIAL JUSTICE

TCC DECISIONS SEEM TO BE RECOGNIZING MODERN HOUSING REALITIES

Homeowners who claim New Housing Rebate often face Canada Revenue Agency (“CRA”) review. The central issues in these cases are often whether the homeowners intended to use the subject home as a primary place of residence (or for some other purposes) and whether the home was in fact occupied as a place of residence following construction or renovation.

While the Tax Court of Canada (“TCC”) has traditionally adopted a fairly rigorous approach when interpreting and applying these two requirements, two recent TCC decisions seem to reflect a more flexible approach, perhaps aligning with modern housing realities.

Sharma v. The King

In Sharma, (2025 TCC 145), a young couple purchased a newly constructed home, which they described as their “dream home”. But after closing, they only spent limited time there, attributable to "work commitments", and spent many weekends at their parents’ homes. The couple rarely cooked at the new home and never did any laundry there. The couple then subsequently sold the property about three months after taking possession.

The CRA audited and denied their New Housing Rebate application, alleging that the couple’s use of the home lacked an element of "permanence", and taking the position that the property was not occupied as a place of residence within the meaning of paragraph 254(2)(g) of the Excise Tax Act (the "ETA").

On appeal to the TCC, the taxpayers successfully persuaded the TCC that they were entitled to the Rebate. The TCC concluded that even though there was an unascertained degree of residency, the occupancy test was met. The presence of personal belongings and the absence of any other residence during the relevant period, along with occasional overnight stays were sufficient.

Paglia v. The King

Similarly in Paglia, (2025 TCC 148), two young men purchased a new condominium and claimed the New Housing Rebate. After purchase, they moved their furniture into the unit, stayed there several days each week, did laundry at the property, but typically spent weekends at their parents’ homes. Approximately eleven months after moving in, they leased the condominium.

The TCC again allowed the Rebate, emphasizing that spending a great deal of time at a parent's home did not negate a homeowner's intention to use a condominium as a place of residence.

Judicial Recognition of Modern Housing Realities?

Sharma and Paglia seem to point to a shift in how the TCC assesses New Housing Rebate claims, particularly where younger homeowners are involved. Rather than measuring occupancy against rigid markers of residential life, the TCC appears increasingly attentive to the practical realities faced by younger generations. These include work-related absences, reliance on parental homes, and non-linear transitions into independent living. These decisions may also be viewed as the TCC's attempts to mete out social justice, particularly in light of current economic and housing pressures.

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