Rochefort – Court of Quebec finds that a quick flip of a development property occurred on capital account

The taxpayer entered into an agreement to purchase a restaurant building and related land in Montreal with a view to tearing down the building and erecting a mixed-use rental project (comprising 44 residential and 6 retail units) – and then, three months later, accepted an offer from the construction company “Groupe Legacé”) which she had asked to bid on doing the construction work, to purchase the property for approximately twice her purchase price. On closing, about five months later, title went directly from the original owner to Groupe Legacé.

In finding that the disposition to Groupe Legacé occurred on capital account, Dortélus JCQ stated:

The Court concludes from the evidence that she did not envisage, at the time of investing in the project, the resale of the St-Laurent Property in its entirety. It was not until she had received a completely unexpected and unsolicited offer from Groupe Legacé, whom she had approach to make a bid as construction contractor on the project, and by reason of the amount that was offered by Groupe Legacé, that she changed her view and decided to sell the St-Laurent Property.

Neal Armstrong. Summaries of Rochefort v. Agence du revenu du Québec, 500-80-031868-152, 18 April 2019 (Court of Quebec) under s. 9 – capital gain v. profit – real estate.