CRA indicates that a non-registrant vending an exempt business can make a s. 167 election on the vended real estate
Why does a non-registrant selling a complete business to a single buyer need to make an s. 167 election, given that the sale of all tangible and intangible personal property of a non-registrant used exclusively in an exempt business would be exempt per ETA s. 141.1(1)(b) and “since the election does not cover the sale of real property,” there seems to be no instance where the election serves any purpose. CRA responded:
Paragraph 141.1(1)(b) does not include sales of real property. In cases where a non- registrant person engaged exclusively in exempt activities makes a supply of a business and taxable real property is included in the agreement for the supply, the person would, subject to section 167, be able to make an election in respect of the supply (including the real property) as long as the recipient is a registrant.
Although this response is technically correct, the question still stands. S. 167(1.1)(b)(i) deems the elected-upon real estate to have been acquired by the recipient for use exclusively in commercial activities, so that if, in fact, the real estate continues to be used in making exempt supplies, it will be subject to GST/HST under the change-of-use rules.