Tax Court Round III

tax court

This morning I visited the Tax Court of Canada again to observe. Every time I go I learn a ton and feel exhilarated by watching the process of justice in action. There were three cases on the docket this morning:

     

      1. An Income Tax Act case that was a no-show.

      1. An Excise Tax Act case that was in respect of a GST/HST reassessment for Input Tax Credits.

      1. An Excise Tax Act case that was in respect of a GST/HST reassessment for a New Housing Rebate.


    I attend the court to learn and see what I can apply to ZheroTax but when I see an unrepresented appellant (taxpayer) I can’t help but want to help them understand the legislation, CRA’s position, and the court decisions on the matter. On this day, the taxpayer in the third case and I started chatting and they explained what had happened to have ended up in the court. In 2014 the taxpayer had borrowed $40k from their mother to enter into a purchase and sale agreement for a new build residential complex but had co-signed with their uncle as purchasers. The taxpayer owned no other real property and wished to occupy the property as their primary place of residence. The taxpayer wasn’t able to get a conventional mortgage to close with the builder and had to turn to a lender of last resort who would only lend on the condition that the purchasers sold the property within 12 months and otherwise did not occupy the property themselves. At closing the builder of the property credited the taxpayer $24,000 for the New Housing Rebate to reduce the consideration paid by an equal amount. At a later time the taxpayer and the uncle sold the property, per the agreement with the lender, without occupying it as place of residence. The uncle was reassessed for the $24,000 + interest in 2015 and the matter has been in appeals since 2015.

    This question was definitively answered in 2018 with Cheema v. HMQ, that all persons on the purchase and sale agreement are the “particular person” as required under subsection 254(2) and therefore a co-signor who didn’t intend to make the residential complex a primary place or residence was generally fatal to the rebate. Subsection 262(3) was amended by the legislators in 2021 to correct what was creating much heartache among purchasers of new residential complexes who needed a co-signer to qualify for the purchase and sale agreement, that reference to any of the individuals on the purchase and sale agreement, or a relation of the individuals (under the Income Tax Act) shall be read as the primary place of residence for any of the individuals. What this means is that a co-signer who doesn’t intend to occupy the property as a primary place of residence is not fatal to the rebate as long as at least one the signers of the purchase and sale agreement, or a relation, intend to occupy the residential complex as a primary place of residence.

    If you, or someone you know, has been denied a New Housing Rebate, get in touch and we’ll help you determine whether you were eligible for the rebate and help appeal the case if you were. Remember, ZheroTax’s unique revenue model is to always make two offers:

    1. A flat rate fee, or

    2. A contingency (success) fee that is 2x higher than the flat fee

    Taxpayer’s choice. The tax professional will not make a contingency offer if they don’t believe the probability of winning the appeal is high. That is a strong indicator that whatever fee arrangement you choose, you have a high probability of winning with the help of the tax professional who has made the offer.