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The Long Arm of the CRA

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We have blogged here and here about the real estate projects that the CRA is currently working on, usually resulting in assessments of GST/HST on sales of renovated homes or short-term rental housing.

In a recent Tax Court case involving Cheema, the CRA was permitted to open up statue-barred periods in order to assess a homeowner for taxable income generated from a short-term purchase and resale of a house in Calgary.  This case serves as a warning for taxpayers in similar situations: treating housing like “inventory” to produce gains will result in CRA assessments even many years later, making Voluntary Disclosures the only viable strategy for addressing past exposure.

The Cheema Decision

The Tax Court in Cheema was asked to consider the CRA’s ability to use aggressive reassessment tactics to maintain thorough oversight of taxpayers.

In this case, Mr. Cheema was assessed back to his 2016 taxation year, with the CRA taking the position that the gain he made on a short-term purchase and resale (he owned the house for about 30 days) was “taxable income”.  The main issue in the case was whether CRA could reassess Mr. Cheema beyond the normal period, which is an approach usually reserved for cases of fraud or misrepresentation. 

As a result, the Tax Court permitted the reassessment under subsection 152(4) of the Income Tax Act, which  allows the Minister to reassess outside of the normal assessment period where “misrepresentation[s]” are made by the taxpayer, due to “neglect, carelessness or wilful default” in the filing of a tax return.  The Court concluded that Mr. Cheema clearly made a “misrepresentation” when filing his return, which omitted the gain he realized on the sale of his property, and that amounted to at least carelessness.

CRA’s Funding Boost in the 2024 Budget

Unfortunately, these situations will not be disappearing anytime soon, with the recent 2024 Budget announcing  a proposed  boost to the CRA’s funding.  This allows the CRA to continue addressing tax non-compliance in real estate transactions, with the Trudeau government pledging $73.1 million over five years, plus potentially another $14.7 million annually thereafter.


When homes are treated as “inventory”, and bought and sold to produce gains, those gains are usually treated “on account of income” for Canadian Income Tax Act purposes.

GST/HST would also be expected to be charged and collected.

Canadians that have been dining out on these sorts of “GIG” economy transactions will need to reassess their income tax and GST/HST positions, and Voluntary Disclosures may be called for.

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