Cheema – Tax Court of Canada confirms that a bare trustee is transparent for tax purposes

The availability of the new housing GST/HST rebate to the taxpayer under ETA s.254(2) turned on him (or his spouse) being the only person who was “liable” under the purchase agreement. CRA denied the rebate on the basis that a friend of the taxpayer had acquired an undivided 1% interest in the property (as a result of requirements of the mortgagee), even though, on the date of closing, the friend executed a declaration of bare trust in favour of the taxpayer and his wife.

In finding that the requirements for the rebate were satisfied, Smith J stated:

The notion of a bare trust as an agency relationship…is well known and well established…. For tax purposes, a bare trust is considered a non-entity in the sense that a beneficiary as principal, is considered to deal directly with property through the trustee as agent or nominee.

Neal Armstrong. Summary of Cheema v. The Queen, 2016 TCC 251 under ETA, s. 254(2)(b).