The taxpayer was an entrepreneur who built and sold rental homes as well as having sold two personal residences that had been constructed by him after a holding period of around 3.5 years each. In 2005 (after the second such residence sale), he and his spouse acquired a vacant lot in Sherbrooke, Québec, and built a house to live in with their children. Several extended family members participated in the construction of the house without pay, and many upgrades were chosen to satisfy his wife’s requirements for her “dream home”, such as concrete heated floors, stone façade, and commercial cooktop. They sold the house in 2008. CRA assessed on the basis that the capital gain from the sale was business income, maintaining that the taxpayer had purchased and sold residential properties in the same geographic area in a repetitive and planned manner for the purpose of earning income.
Aubé JCQ found (at paras 69.1, 69.5, 69.6, 70, 71, and 72, Tax Interpretations translation):
… [T]he whole family was involved in the project. …
The profit realized on the sale was used to reimburse the lines of credit.
The financial situation motivated the sale of the property. Mr. R. F. stated that… his lines of credit had reached their limit.
The Court concludes, like the Court of Appeal in Hardy v. Agence du revenu du Québec, [2015 QCCA 564], that the taxpayers' intention was to house their family and not to make a profit, Mr. R. and his spouse built the building to meet their needs and consequently the proceeds from the sale did not constitute business income.
Although Mr. RF works in the construction industry, this does not deprive him of the right to acquire and sell his principal residence if circumstances make it unavoidable or desirable, even if the transactions occur over a relatively short period of time.
The evidence demonstrates that the sale subject to the assessment was justified on the basis of personal and family considerations of Mr. R.F.
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