Al-Hossain – Tax Court of Canada states that a declaration of trust cannot have a backdated effective date

Where two unrelated individuals purchase a new home jointly, each is required to satisfy the requirements for the new housing GST/HST rebate including that they each must occupy the home. Although Davidson adopted the dubious proposition that a non-occupying co-purchaser will scupper the rebate even if she is only a registered co-owner and is acquiring no beneficial interest, but this seems to have been implicitly rejected in Goyer.

Although her reasons are quite unclear on this point, Lyons J in Al-Hossain may have followed the Davidson rather than the Goyer approach. However, in any event, she went on to reject a submission that the non-occupying co-purchaser (who had signed the ownership and mortgage documents only to facilitate mortgage financing for his friend and appears to have been only an accommodation party) held his co-ownership interest only as bare trustee, as evidenced in a statutory declaration made less than three weeks after closing, stating:

The creation of a trust must be properly documented containing the requisite elements of a trust, dated, signed and in existence prior to or contemporaneous with the matter that is the subject of the trust arrangement.

She did not cite authority for this statement, which is inconsistent with judicial findings that property has been held on and after a date on trust or a resulting trust notwithstanding the lack of a contemporaneous trust deed or other document (Nelson, Bouchard).

Continued judicial statements like this might embolden CRA to resuscitate the position in the defunct IT-216 that it will not accept that a corporation holds real estate for its shareholder unless the declaration of trust was signed at the time of the property’s acquisition.

Neal Armstrong. Summaries of Al-Hossain v The Queen, 2014 TCC 379 under ETA s. 254(2) and General Concepts – Effective Date.