Recent Tax Court of Canada Case – The Minister reassessed 2004, 2005 and 2007 adding to the taxpayer’s reported income tax unreported proceeds of sale of three residences, characterizing the proceeds as business income.

Penalties for gross negligence were also imposed.  The taxpayer appealed to the Tax Court of Canada.  The taxpayer’s appeal was dismissed.  From 2001 to 2007, the taxpayer bought and resold seven single family residences.  His pattern was to buy vacant land, build a dwelling on the land, live in the dwelling for a few months, and then resell it at a profit.  He typically held properties for periods ranging from 107 to 615 days and sold them through real estate agents. His alleged reasons for sale (e.g., family problems, health problems experienced by his former wife and high mortgage rates), all lacked credibility.

In addition, at all times he had a secondary intention to resell his properties at a profit, and was therefore in the business of buying and selling properties.  The penalties were also justified, as were the reassessments for 2004 and 2005 beyond the normal reassessment period.  This was because the taxpayer had not acted diligently to report the proceeds of disposition of the three residences in issue and he had also demonstrated gross negligence in failing to consult professional advice before completing his returns for the years under appeal.  The minister’s reassessments were affirmed accordingly.
Gigu’ere v. The Queen, 2012 DTC 1262

For further advice or assistance with these or any other financial issues, please contact a Millards representative at (519) 759-3511.