Words and Phrases - "insolvency"

An individual disposed of a housing unit to improve a declining financial situation (the costs associated with the housing unit caused the individual to have severe cash outflows resulting in maximizing credit cards in order to pay for basic needs). Regarding whether the s. 12(13)(b)(viii) exception applied, CRA stated:

Black’s Law Dictionary defines “insolvency”, in part, as “the condition of a person who is insolvent; inability to pay one’s debts; lack of means to pay one’s debts…or the condition of a person who is unable to pay his debts as they fall due…”.

… Where it can be established that a taxpayer has disposed of a housing unit located in Canada, which was owned for less than 365 consecutive days, due to or in anticipation of the inability or lack of means to pay their debts as they become due, then the housing unit will not be considered a flipped property. This could include circumstances where a taxpayer is relying on other forms of debt (such as credit cards) to pay for their basic personal expenses, the situation is expected to continue or has been ongoing for some time, and disposing of the housing unit would allow them to significantly improve their financial situation, thereby avoiding insolvency or becoming insolvent. It should be noted that the insolvency life-event exception under subparagraph 12(13)(b)(viii) of the Act is not limited to the taxpayer being unable to pay a specific debt relating to the housing unit.