Background
Adam Becker bought an “as-is” Toronto house in 2010 for $567,000. The existing house was demolished and replaced with a roughly 3,500-square-foot home, with Becker’s brothers-in-law selecting the property and managing nearly all design and construction decisions. When construction finished in February 2013, Becker immediately listed the property and sold it within months for $1,745,000.
Becker obtained a GST/HST new housing rebate, but the Minister later assessed GST/HST on the property’s supply for the reporting period ending May 31, 2013. Although the Minister ultimately reinstated the housing rebate because its denial had occurred outside the limitation period, the Minister maintained the assessment on the supply, allowed a general rebate for construction-related GST/HST subject to the housing rebate already received, and imposed a failure-to-file penalty.
Becker appealed, arguing among other things that he was not a “builder,” that he had occupied the home, that the allowed housing rebate bound the Minister, and that the Minister could not defend an assessment originally based on the self-supply rules by relying instead on the property’s third-party sale.
The Court’s Holding
The Tax Court dismissed the appeal. It found Becker’s testimony inconsistent, vague, and not credible, and concluded from the objective evidence that the construction was an adventure or concern in the nature of trade. Becker was therefore a builder for GST/HST purposes. The Court found that his primary intention was to profit from the sale—or, at minimum, that profit was a secondary intention—and that he never occupied or primarily used the property as a residence.
The Court held that the Minister’s separate decision to allow the new housing rebate did not bind the Minister when assessing GST/HST on the property’s supply. The rebate had been reinstated because the reassessment denying it was late, and its eligibility was not before the Court.
Although the assessment and objection decision had relied on the self-supply rules, amended subsection 298(6.1) of the Excise Tax Act permitted the Minister to defend the assessed amount under the general supply rules. The potential self-supply and actual sale were inextricably linked consequences of one series of events, and both the assessed period and amount were correct. Because Becker never filed the required return, the assessment was not statute-barred, and he failed to establish due diligence against the section 280.1 failure-to-file penalty.
Key Takeaways
- A newly built home may be constructed in an adventure or concern in the nature of trade—and its owner treated as a builder—when the objective evidence shows an intention to sell for profit, even if the transaction is the owner’s first of its kind.
- An assessment allowing a new housing rebate does not necessarily bind the Minister in a separate assessment imposing GST/HST on the property’s supply, particularly when the rebate was preserved only because the denial was out of time.
- Amended subsection 298(6.1) may permit the Minister to support an assessment on an alternative statutory basis when the potential taxable events are closely linked and the alternative does not change the assessed period or amount.
Why It Matters
The decision illustrates that courts will test claimed residential intentions against the full course of conduct, including the taxpayer’s involvement in construction, the timing of listing and sale, and the credibility of the explanations offered. Brief or unsupported claims of occupancy will not necessarily prevent GST/HST from applying to a newly constructed home sold shortly after completion.
It also provides significant guidance on the post-2016 scope of the Minister’s power to defend a GST/HST assessment on an alternative basis. At least where the original and alternative tax consequences arise from one closely connected series of events, identifying the wrong taxable mechanism at the assessment stage may not invalidate an otherwise correct assessment.