Dusablon – Court of Quebec finds that a couple who renovated a house without moving in were ineligible for the principal residence exemption

Two individuals acquired a house in Montreal in a dilapidated condition for $695,000, spent $350,000 on having substantial renovations made, and put the property up for sale seven months after its acquisition at a price of $1,250,000, which was achieved in a sale two months later. The ARQ did not challenge the proposition that they had disposed of the house on capital account, but did deny the principal residence exemption. They had never moved into the property or even had any meals there, but stayed in a shared rented apartment.

In denying the exemption, Edwards JCQ noted that the taxpayers had not pleaded that they had “inhabited” the property but rather that they had "occupied" it by reason of their supervision of (and, in the case of one of the taxpayers, his participation in) the renovation work, and stated that the word “inhabit” “does not include the intention to inhabit a place, but is limited to in fact inhabiting there” (his emphasis).

Neal Armstrong. Summary of Dusablon v. Agence du revenu du Québec, 2018 QCCQ 3032 under s. 54 – principal residence – (a).