Prima Properties – Tax Court of Canada finds that a taxpayer was not negligent in failing to ask its accountant about a change in use of its rental property

CRA assessed the taxpayer on the basis that there was a change in use of its rental property from commercial activity to exempt rental activity, when it started to rent the property to an NPO for homeless people, thereby triggering GST equal to the previously claimed input tax credits for the property. Paris J found that the Crown had failed to establish the basis for making this assessment beyond the four-year statute-barring period.

First, no “misrepresentation” had been established, as the Crown had failed to establish that in fact the users of the facility had exempt leases or licences, i.e., for continuous occupancy of over one month.

Second, there was no “carelessness” or “neglect.” The taxpayer’s principal, as a lay person, could not be expected to recognize the issue of triggering a change of use – and to expect him “to initiate a discussion with [the company’s accountant] concerning the possible application of a highly technical provision of the Act would be to hold him to an unrealistically high standard of care.”


Aridi … found that it was not sufficient to show negligence on the part of the taxpayer’s professional advisor in making the misrepresentation, and that the taxpayer must also be shown to have acted in a negligent or careless manner.

Neal Armstrong. Summary of Prima Properties (92) Ltd. v. The Queen 2019 TCC 4 under ETA s. 298(4)(a).