What was the Taxpayer's Intention? Becker v. The King, 2026 TCC 158
If a taxpayer is determined to be a “builder” pursuant to subsection 123(1) of the Excise Tax Act, R.S.C., 1985, c. E-15 they are obligated to charge and remit GST/HST to the Canada Revenue Agency (CRA) on a home sale. Paragraph 123(1)(f) of the definition of “builder” excludes certain individuals who construct or substantially renovate a home otherwise than in the course of a business or an adventure or concern in the nature of trade.
In the decision in Becker v. The King, 2026 TCC 158 [Becker] the question was whether the taxpayer built the new home as a personal residence or whether the project was, from the beginning, an adventure or concern in the nature of trade. Was the taxpayer a “builder”? If he was did the self-supply exception pursuant to subsection 191(5) apply? Yes and no according to the Tax Court of Canada. In reaching that conclusion, it placed considerable weight on intention.
The Taxpayer said he Intended to Live there
The taxpayer testified that he bought the home as a personal residence. He was living with his parents at the time and wanted to remain close. He also said that he wanted to build and customize a home to suit his preferences. Of course, the Tax Court did not simply accept Mr. Becker’s description of his intentions. It compared his evidence with the other sometimes contrasting evidence.
For example, he provided inconsistent reasons for why he eventually sold the property. In a questionnaire completed for the CRA, answers differed from what the taxpayer provided at trial. The Court also found it difficult to reconcile his stated desire to build a customized home with the fact that his brothers-in-law selected the property and handled virtually all of the construction decisions. The inconsistencies did not support the taxpayer’s stated intention.
Importantly, the Tax Court of Canada considers evidence on a balance of probabilities. In other words, which version of the facts is more probable considering the overall evidence? Hence, measuring intention requires consideration of all of the evidence presented in any form. This, for example, can include a comparison between a taxpayer’s oral statements before a Tax Court judge versus a previous written submission to CRA.
The Timing of the Sale Mattered
The events following construction were also significant. The original house was demolished and a new 3,500-square-foot home was built. Construction was completed in February 2013 and the property was put on the market that same month and sold shortly afterwards. While the property had been owned for several years, the period between completion of the new house and its sale was less than four months. The Court also noted that the taxpayer had entered into an agreement to purchase another property before it was sold. Taken together, the facts made it difficult for the Court to accept that it was simply a home that the taxpayer intended to keep but later decided to sell.
What about Secondary Intention? Canada Safeway Limited v. Canada, 2008 FCA 24
Simply imagining selling a property if the right offer came along, a secondary intention, does not automatically suggest a taxpayer engaged in an adventure or concern in the nature of trade because of a subsequent sale. The mere possibility of resale is not enough. As per para. 61 of the Federal Court of Appeal decision in Canada Safeway Limited v. Canada, 2008 FCA 24:
[61] A number of principles emerge from these decisions which I believe can be summarized as follows. First, the boundary between income and capital gains cannot easily be drawn and, as a consequence, consideration of various factors, including the taxpayer’s intent at the time of acquiring the property at issue, becomes necessary for a proper determination. Second, for the transaction to constitute an adventure in the nature of trade, the possibility of resale, as an operating motivation for the purchase, must have been in the mind of the taxpayer. In order to make that determination, inferences will have to be drawn from all of the circumstances. In other words, the taxpayer’s whole course of conduct has to be assessed. Third, with respect to “secondary intention”, it also must also have existed at the time of acquisition of the property and it must have been an operating motivation in the acquisition of the property. Fourth, the fact that the taxpayer contemplated the possibility of resale of his or her property is not, in itself, sufficient to conclude in the existence of an adventure in the nature of trade. In Principles of Canadian Income Tax Law, supra, the learned authors, in discussing the applicable test in relation to the existence of a “secondary intention”, opine that “the secondary intention doctrine will not be satisfied unless the prospect of resale at a profit was an important consideration in the decision to acquire the property” (see page 337). I agree entirely with that proposition. Fifth, the viva voce evidence of the taxpayer with respect to his or her intention is not conclusive and has to be tested in the light of all the surrounding circumstances [emphasis added]…
What the Court found in Becker
The Court went further than simply concluding that the taxpayer might have contemplated a future sale. It concluded that his primary intention was to profit from the sale or, at a minimum, that he had a secondary intention to do so. That finding was based not just on the taxpayer’s testimony, but on the surrounding circumstances. The Court considered the way the property was acquired, the extent of the redevelopment, the taxpayer’s limited involvement in the construction, the immediate listing after completion, the short period before the sale and the inconsistencies in his explanations. In other words, the Court examined the entire transaction to determine what the taxpayer was really trying to accomplish.
Why the Distinction Matters
The interesting point in Becker is therefore not simply that the Court mentioned “secondary intention.” The more important point is when that intention existed and what role it played in the acquisition and development of the property.
If a person buys a property intending to make it their home, and only later decides to sell because their circumstances change, that does not necessarily make the transaction an adventure or concern in the nature of trade.
But if the evidence shows that resale at a profit was already part of the plan when the property was acquired—or that the property was being developed with that possibility as an operating motivation—the analysis can be very different. That is the distinction taxpayers need to keep in mind when considering the paragraph 123(1)(f) exception to the “builder” definition.
The Tax Court also considered the application of the factors from the decision in Happy Valley Farms Ltd. v. The Queen, 1986 CanLII 7434 (FCTTD) [Happy Valley]:
- The nature of the property sold;
- The length of period of ownership;
- The frequency or number of other similar transactions by the taxpayer;
- Work expended on or in connection with the property realized;
- The circumstances that were responsible for the sale of the property; and
- Motive.
The Decision
Becker is ultimately a case about considering the taxpayer’s stated intention and determining what the facts indicate. The taxpayer said he intended to live in the home. The Court was not convinced. The immediate sale following completion, his purchase of another home while the first was being sold, his limited involvement in developing the property and the inconsistencies in his evidence all pointed toward a different conclusion.
The taxpayer did not occupy the newly constructed home. The Court concluded that the property had been acquired and redeveloped in the course of an adventure or concern in the nature of trade. Accordingly, the taxpayer qualified as a “builder” under subsection 123(1) of the Excise Tax Act, R.S.C. 1985, c. E-15 and could not benefit from the exclusion in paragraph 123(1)(f). The Tax Court also concluded that the self-supply exception as per subsection 191(5) did not apply because the taxpayer had never resided in the home. Therefore, he was assessed as a “builder” for GST/HST purposes.
SpenceDrake Tax Law – Toronto Tax Lawyers
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