Wilson 555 – Tax Court of Canada finds that a property acquired under a s. 85(1) roll for condo development was capital property, with no change of use until well after rezoning approval

After it was determined that a developer would seek to develop, as residential condos, two properties in the group that had been acquired as capital properties for rental as office buildings, they were transferred in January 2008 on a s. 85(1) rollover basis to a newly-incorporated group company. In June 2008, an application for a zoning change to industrial use was made, in February 2010, the zoning change was approved, and in September 2011, a bank agreed to finance the project. In May 2012, the office buildings were demolished, and project construction commenced in October 2012.

Wong J found that since, in a rollover transaction, the transferee “stands in the place of the original purchaser so intention should be examined at the time of the original purchases”, the properties’ character as capital property flowed through to the taxpayer.

Regarding when there was a change of use for the purposes of ss. 13(7) and 45, she noted the “long-standing principle that ‘a clear and unequivocal positive act implementing a change of intention’ is necessary”. She found that such a change of use did not occur until the time the bank agreed to finance the residential condominium project, as it was not until this point that all the conditions required to proceed with the condominium development had been fulfilled.

Neal Armstrong. Summary of Wilson 555 Avenue Inc. v. The King, 2026 TCC 104 under s. 45(1)(a).