Citation: 2015 TCC 11
Date: 20150116
Docket: 2014-1543(GST)I
BETWEEN:
NANCY MENDES,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR JUDGMENT
Woods J.
[1]
This appeal concerns an application by Nancy
Mendes for the GST/HST new housing rebate under the Excise Tax Act.
[2]
The Crown submits that the rebate should be
disallowed because the requirement in paragraph 254(2)(b) of the Act has not been satisfied.
[3]
The provision is reproduced below.
254.(2) Where
[…]
(b)
at the time the particular individual becomes liable or assumes liability under
an agreement of purchase and sale of the complex or unit entered into between
the builder and the particular individual, the particular individual is
acquiring the complex or unit for use as the primary place of residence of the
particular individual or a relation of the particular individual,
[…]
[4]
The issue to be decided is whether, at the time
the agreement of purchase and sale was entered into, Ms. Mendes intended to
acquire the property for use as a primary residence. Ms. Mendes has the burden
to establish the relevant facts on a prima facie basis.
Legislative background
[5]
The parties agree that there is a narrow issue
to be decided and they provided very little background regarding the broader legislative
scheme. I have restricted my analysis to this issue. However, for completeness
it is useful to comment on what I presume to be the applicable legislation.
[6]
According to Ms. Mendes’ rebate application, a
rebate amount of $24,000 was claimed under box D, which is described as “Provincial new housing rebate amount.” There was no amount claimed under box C, which is
described as “GST/HST new housing rebate amount.”
[7]
According to the Reply, the rebate is properly
disallowed pursuant to subsections 254(2) and 256(2.1) of the Act and
subsection 41(2) of the New
Harmonized Value-Added Tax System Regulations No. 2. Since subsection 254(2) provides for a
federal rebate, I have assumed that the provincial rebate amount of $24,000 is
claimed pursuant to subsection 256(2.1) of the Act.
[8]
I would also mention that Ms. Mendes assigned
the rebate to the builder. As far as I can tell, the Minister paid the rebate
to the builder and now seeks a return of the rebate from Ms. Mendes who was credited
with this amount by the builder.
Factual background
[9]
In 2011, Ms. Mendes and her spouse acquired two
newly-built residential properties near each other in Brampton, Ontario. One of the properties is the subject matter of this appeal. The other was the
subject of a similar new housing rebate that was granted to Ms. Mendes’ spouse.
[10]
Both of these transactions are relevant and are
described below.
[11]
On October 16, 2009, Ms. Mendes signed an
agreement of purchase and sale in respect of a house to be built at 52 Balin Crescent, Brampton, Ontario (the “Balin Property”).
[12]
On April 15, 2010, Ms. Mendes and her spouse,
Maxim Mendes, signed an agreement of purchase and sale in respect of a house to
be built at 32 Legendary Circle, Brampton, Ontario (the “Legendary Property”).
[13]
On or around August 30, 2011, Mr. and Ms. Mendes
took ownership of the Balin Property and moved in with their two children and
Ms. Mendes’ parents.
[14]
On November 2, 2011, the Balin Property was
listed for lease.
[15]
On or around December 13, 2011, Mr. Mendes,
either alone or together with Ms. Mendes, took ownership of the Legendary
Property and the family moved there from the Balin Property. One exhibit
suggests that Mr. Mendes was the sole owner (Ex. A-2) and another suggests that
they were co-owners (Ex. R‑4, Tab A). Nothing turns on this in this
appeal.
[16]
On December 19, 2011, the Balin Property was
listed for sale.
[17]
On January 16, 2012, a one year lease was
entered into with respect to the Balin Property to commence March, 2012.
[18]
On February 2, 2012, the Balin Property was
sold.
[19]
The Mendes family still resides at the Legendary
Property.
[20]
Ms. Mendes applied for the new housing rebate
with respect to the Balin Property as her primary residence and Mr. Mendes
applied for the same rebate with respect to the Legendary Property.
[21]
In addition to these properties, it appears that
Mr. and Ms. Mendes also owned other residential properties for purposes of
leasing. During the period from 2010 to 2013, Ms. Mendes and/or her spouse
claimed new housing rebates as landlords in respect to three other properties.
[22]
During the relevant period, Mr. Mendes was a
real estate agent. Ms. Mendes is also now a real estate agent.
Discussion
[23]
The question is whether, at the time of signing
the agreement of purchase and sale for the Balin Property, Ms. Mendes intended
to use the property as her primary residence.
[24]
Ms. Mendes testified that when she signed the
agreement of purchase and sale for the Balin Property, she intended that it
would be the family home.
[25]
She also testified that the intention with
respect to the Legendary Property when that agreement and purchase and sale was
entered into was for this property to be a source of rental income for her
spouse.
[26]
Ms. Mendes further testified that these
intentions changed around the fall of 2011 when she received the results from a
medical test that indicated a risk of cancer. She testified that the Legendary
Property was more suitable to accommodate her health problem. She stated that
it was closer to a hospital and that it had a main floor bedroom with ensuite
bathroom. In light of this, she stated that the family moved from the Balin
Property to the Legendary Property when the latter property was acquired.
[27]
I was not convinced by this testimony. It was
self-interested, and it does not seem to be plausible.
[28]
I observe that the Legendary Property was
significantly more expensive than the Balin Property and the main floor
sleeping accommodations at the Legendary Property were likely more suitable for
Ms. Mendes’ parents. This is the bedroom that the parents currently occupy.
[29]
In addition, the objective evidence suggests
that the concern about cancer was at a very early stage.
[30]
It is possible that Ms. Mendes’s testimony
regarding the reason for the move to the Legendary Property was true, but it
seems unlikely that this is the case.
[31]
The evidence as a whole suggests that it is more
likely that when the agreement of purchase and sale was signed for the
Legendary Property, Ms. Mendes’ intention was to use this property as
their primary residence rather than it being a rental for Mr. Mendes.
[32]
This is more consistent with the agreement of
purchase and sale for the Legendary Property which was entered into by both Mr.
and Ms. Mendes. It is also more consistent with Mr. Mendes obtaining a new
housing rebate on the Legendary Property on the basis that it was intended as
the primary residence (Affidavit of Teresa D’Sa, Tab A).
[33]
It is not clear from the evidence why the family
moved to the Balin Property before moving to the Legendary Property a few
months later. It may have been for tax reasons, including the exemption from
income tax available on the sale of a principal residence. The profit from the
sale of the Balin Property was approximately $193,000. This would provide an
explanation for the attention to detail when the family moved into the Balin
Property, such as providing change of address notifications.
[34]
To a great extent, Ms. Mendes has attempted to
establish her intention at the time of entering into the agreement of purchase
and sale for the Balin Property by evidence that she actually moved into the
Balin Property and had an unexpected reason to move shortly thereafter.
[35]
I did not find this testimony to be convincing
but this is not the end of the matter. Intention is to be determined at the
time the agreement of purchase and sale was entered into. This was October 16,
2009.
[36]
This date is approximately six months before the
agreement was signed with respect to the Legendary Property. Accordingly, the
requirement in s. 254(2)(b) would be satisfied if Ms. Mendes first had an
intention to use the Balin Property as a primary residence and then changed
this intention six months later when the agreement was signed with respect to
the Legendary Property.
[37]
Although this possibility is plausible, the
evidence was not sufficiently reliable or detailed for me to be satisfied as to
Ms. Mendes’ intention when the agreement was signed for the Balin Property.
[38]
Ms. Mendes simply made brief statements as to
her intention on the dates that the agreements of purchase and sale were signed
for the Balin Property and Legendary Property. The evidence was simply not
detailed enough to be convincing.
[39]
For these reasons, I have concluded that the
requirement in s. 254(2)(b) is not satisfied. The appeal will be dismissed.
Signed at Toronto, Ontario this 16th day of January 2015.
“J.M. Woods”
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