Nicosia - Tax Court finds that individuals’ brief occupancy of their newly-constructed home was sufficient to exempt its sale (no self-supply was assessed)

Two adult siblings, while living with their parents, used funds mostly provided by their parents to acquire and tear down an existing Toronto home, construct a new house and list it for sale immediately after the issuance of a certificate of occupancy, with the sale occurring half a year later.

Yuan J accepted the siblings’ testimony that they occupied the new house for a period of around a month prior to the issuance of the occupancy certificate. Regarding the exemption in ETA Sched. V, Part I, s. 2 (for a sale of a residential property by a non-builder), this finding helped to support that the property was acquired for personal use rather than in the course of a business or an adventure in the nature of trade. On the other hand, if the siblings were builders who resided at the new house prior to the sale and the s. 191(1) self-supply rule did not apply to them due to the s. 191(5) exemption for building for own use, the sale would be exempted pursuant to Sched. V, Part I, s. 3. If they were builders without the s. 191(5) exemption applying, then their occupation of the house as a residence prior to the start of the assessed reporting periods would attract GST/HST on a self-supply occurring at the time of such residential occupancy (which had not been assessed) - rather than at the time of the subsequent sale, which would be exempted under Sched. V, Part I, s. 4. Accordingly, given the occupancy finding, the sale was exempted under each alternative.

It thus was unnecessary to find whether the siblings were builders, and Yuan J noted uncertainty on this point given inter alia that around $1 million of the profit on the sale went to the siblings’ parents.

Neal Armstrong. Summary of Nicosia v. The King, 2024 TCC 112 under ETA Sched. V, Part I, s. 4.