Swift – Tax Court of Canada references the Coates test that a builder is not required to self-assess on building a home for his own occupation even where there may be a secondary resale intent

Over a 23-year period, an individual, who through a wholly-owned company (“TSC”) carried on a small construction business, bought and sold five homes in the Victoria, B.C. area. The fourth property was bought as a vacant lot in October 2009, commenced to be occupied by him and his family a year after a home had been erected and was sold three years later due to financial pressure on the taxpayer resulting from a business downturn.

Sommerfeldt J accepted the individual’s testimony that the fourth property “was… intended to be occupied as a residence, i.e., for personal enjoyment” and “as his dream home” and found that there was no adventure (or business). Accordingly, Sommerfeldt J found that the individual had not constructed that property as a builder and, in particular, not as part of an adventure in the nature of trade or in the course of a business, so that the individual was not required to self-assess under s. 191(1) upon substantial completion and occupancy.

Sommerfeldt J then considered the exception in ETA s. 191(5), which provides that an individual builder is not required to so self-assess where “after the construction … of the complex … is substantially completed, the complex is used primarily as a place of residence for the individual [or family].” He quoted the conclusions of Hogan J in Coates that:

[S]ubsection 191(5) … requires … a simple factual determination as to whether or not the property was used as a family home after it was substantially completed. …

[T[he exception cannot be interpreted as requiring that the property have been built only for purely personal reasons. This means that an individual can benefit from the exception even if he has the secondary intention, at the time of its construction, of reselling the property, provided he actually uses it as a place of residence after the construction is completed.

Sommerfeldt J then stated:

[T]hey used the ... Property primarily as a place of residence. Thus, Mr. Swift has satisfied the test enunciated in Coates.

Unlike Coates, this was not an informal procedure case (a distinction to which CRA, if noone else, pays heed).

Neal Armstrong. Summary of Swift v. The Queen, 2020 TCC 115 under ETA s. 123(1) – builder – (f) and s. 191(5).