Beaudet and Saucier – Tax Court of Canada finds that the FMV of a newly-constructed apartment building is its direct and indirect cost

An apartment building which is constructed for rental by the builder generally is subject to GST on its fair market value when the first tenant moves in.  Since this GST cost is non-creditable (subject to a new accommodation rebate), there is an additional GST cost to the extent that such FMV is higher than the costs of the new apartment property.  Lamarre J found that because there was no evidence of some specific market anomaly such as a zoning restriction which would cause the FMV of the new apartment properties to be higher than their cost, their FMV was equal to the determined costs.  Such costs included an estimated financing cost and imputed management fee of 1.5% and 5% of total costs, as well as advertising expenses, and excluded some cost overruns, e.g., because of substandard ground conditions.

Neal Armstrong.  Summary of Beaudet and Saucier v. The Queen, 2014 TCC 52 under General Concepts – fair market value – real estate.