CRA indicates that individuals might recover ITCs for construction work performed prior to the formation of their partnership by claiming a s. 257 rebate on the partnership formation
Three individuals acquired a lot, engaged a contractor to demolish the existing house, subdivided the lot into two, and engaged another contractor to start building two houses, each of which would be used as a primary place of residence of an owner or owners. However, partway through the construction of the houses, they decided that, once the construction was completed, each lot with the finished house would instead be sold. After such decision, the property owners registered a partnership for GST/HST purposes with CRA.
CRA ruled that the partnership, if indeed it had been formed, could not claim ITCs respecting various costs that had been incurred prior to the partnership formation. CRA indicated that if any transfer of beneficial ownership of the land to such a partnership (albeit, with registered title remaining with the individuals) occurred in the course of a business (rather than in the course of an endeavour of constructing personal residences), the transfer would be a taxable supply, so that the individuals (assuming they were not registered) could be entitled to a rebate under ETA s. 257 of the tax previously paid on the construction planning and work.
Neal Armstrong. Summaries of 15 November 2022 GST/HST Ruling 231643 under ETA s. 257(1) and General Concepts - Ownership.