Background
In February 2015, Michelle Qureshi entered into a pre-construction agreement to purchase a two-bedroom condominium at 255 West 1st Street, North Vancouver, British Columbia, for $659,900. Construction completed and the purchase closed in October 2017. Within six weeks of taking possession, the Property was listed for sale at $1,189,000. It sold in June 2018 for $1,161,000, generating a gain of approximately $456,907. Qureshi did not report the gain, asserting that the condominium was her principal residence under the Income Tax Act (ITA).
The Minister of National Revenue disagreed on two fronts. Under the ITA, the Minister reassessed Qureshi’s 2018 taxation year to include the full gain as business income on the basis that the purchase and sale constituted an adventure or concern in the nature of trade. Under the Excise Tax Act (ETA), the Minister determined that Qureshi was a “builder” within the extended statutory definition, had never occupied the unit as her primary residence, and was therefore required to collect and remit GST on the sale — assessed at 5% of the sale price, yielding net tax of $58,050 plus interest and penalties.
Three witnesses testified at trial: Qureshi, her former husband Murtaza (Monty) Qureshi, and a CRA GST auditor. The court applied the multi-factor test from Happy Valley Farms Ltd. v. MNR, [1986] 2 CTC 259 (FCTD), as affirmed in Wall v. Canada, 2021 FCA 132, to assess whether the acquisition was on income account. That same framework governs the ETA “builder” question because paragraph (f) of the builder definition excludes individuals who acquire an interest otherwise than in the course of a business or adventure in the nature of trade.
The Court’s Holding
Justice Derksen dismissed both appeals and awarded costs to the Crown. On the ITA issue, the court found that Qureshi acquired and sold the condominium in the course of an adventure or concern in the nature of trade, so the gain was properly included in income as business income and the principal residence exemption was unavailable. The court found that the length of ownership (from possession in late October 2017 to a sale that closed in June 2018), the appellant’s documented history of income-account real estate activity, her simultaneous ownership of a large family home on Gallagher Place in West Vancouver financed with a five-year fixed closed mortgage, and a short-term unsecured loan from her ex-husband explicitly described as financing for “her investment property” all pointed strongly toward a resale motivation at the time of acquisition.
The court rejected Qureshi’s evidence that she moved into the unit in late November 2017 and later decided to sell because the building was noisy and unsuitable. Justice Derksen found this account implausible: the Property was listed for sale on December 6, 2017 — within days of the claimed move-in and while she had been away traveling — leaving no meaningful opportunity to form the view that the unit was unsuitable for long-term living. The court also noted a willingness on the appellant’s part to overstate her position, citing an email to the developer that falsely implied she had no other housing if repairs were not completed. The court further found that Qureshi’s prior letter to the CRA in 2011, in which she described herself as engaging in “small-scale property refurbishment projects” with experience in real estate, was inconsistent with her trial posture.
On the ETA issue, because the court found Qureshi acquired the property in the course of an adventure or concern in the nature of trade, the paragraph (f) exclusion from the “builder” definition did not apply and she was a builder within the meaning of s. 123(1). The court also declined to accept her alternative argument that the self-supply exception in s. 191(5) of the ETA sheltered the transaction, noting that the Minister had not assessed under the self-supply deeming rule in s. 191(1) but rather on the basis that she made a taxable supply on the June 2018 sale — and that in any event her claimed primary occupancy of the unit was not credible.
Key Takeaways
- There is no principal residence exemption under the ITA where the property is acquired and sold as part of a business or adventure in the nature of trade; a taxpayer’s subjective characterization is secondary to objective evidence of resale intent at the time of acquisition.
- Ownership of a separate, fully financed primary residence during the holding period is a significant circumstance weighing against a claim that a pre-construction condominium was acquired as a long-term home.
- Communications by third parties — here, the ex-husband’s bank emails describing the closing funds as a loan for “her investment property” — can be highly probative of the taxpayer’s actual intent, even where the taxpayer disavows the characterization.
- Under the ETA’s extended “builder” definition, an individual who acquires a pre-construction condominium interest in the course of an adventure or concern in the nature of trade cannot rely on the individual carve-out in paragraph (f) and must collect GST on any taxable supply made on resale.
- Implausible or internally inconsistent witness testimony, especially regarding occupancy, will undermine a principal-residence or primary-residence defence in both the ITA and ETA contexts.
Why It Matters
This decision illustrates how Canada’s Tax Court scrutinizes the entire factual matrix — financing structure, travel records, listing timelines, prior real estate history, and third-party communications — when a taxpayer claims the principal residence exemption on a condominium that was sold quickly after completion. For legal practitioners advising clients in the pre-construction condominium market, the case reinforces that a pattern of real estate transactions, reliance on short-term financing, and rapid re-listing are each independent indicators that can, in combination, convert what a client regards as a home purchase into a taxable business venture.
The dual ITA/ETA analysis also highlights a structural feature of Canadian tax law that frequently surprises taxpayers: even if an individual never intended to be in the “construction” business, the ETA’s broad definition of “builder” can render a pre-construction purchase taxable for GST purposes if the acquisition had a resale purpose. The case confirms that the adventure-in-the-nature-of-trade inquiry is applied consistently across both statutes, so a finding adverse to the taxpayer on the income tax side will almost inevitably flow through to GST liability as well.