House-Flippers Beware: You are not eligible for GST/HST new housing rebates

Introduction: Self-represented litigant tried to defend a house-flip

In March 2025, the Tax Court of Canada delivered the judgment on Ram v The King, 2025 TCC 49, dismissing the appeal by the self-represented litigant Aneeta Ram against the Canada Revenue Agency regarding the denial of her claim for the GST/HST new housing rebates.

In 2016, Ms. Ram and her friend, Pardeep Kumar, both signed an agreement with a builder to purchase a pre-construction house for $287,000. Ms. Ram said they purchased the new house as an investment on a 50/50 partnership basis. In July 2018, the purchase closed when construction was completed, and Ms. Ram applied for the GST/HST new housing rebates of $22,000.

In October 2018, three months after closing, Ms. Ram and Mr. Kumar sold the house for $439,000, a classic example of a "house-flip." Ms. Ram did not report capital gains on the sale at the time. Neither Ms. Ram, Mr. Kumar, nor any of their relatives occupied the house at any time before it was sold.

In January 2020, the CRA issued a notice of assessment to Ms. Ram, disallowing the rebates. The notice was sent to the address of the house as on the rebate application. Ms. Ram was not aware of the assessment until January 2023, when she was contacted by the CRA Collections Division demanding the repayment of $28,000, including the disallowed rebates of $22,000 and the accumulated interest of $6,000.

Ms. Ram inquired, and in February 2023 (more than four years after the rebate application was made), the CRA re-sent the notice of assessment originally issued in January 2020 to her residential address.

Ms. Ram, representing herself, raised the following four arguments:

1. She did not sign the rebate application, so she should not be liable to repay the rebates.
2. The purchase of the house was made on a 50/50 partnership basis, so she should not be fully liable to repay.
3. The notice of assessment was sent to the wrong address, so she should not be liable for the interest.
4. The notice of assessment was sent to the correct address more than four years after the rebate application was made, so the assessment was statute-barred.

Conditions and framework for the GST/HST new housing rebates

The GST/HST new housing rebates include the federal portion and the provincial portion (Ontario, in this case). The Tax Court started by reviewing the conditions and the framework for the rebates. There are two main conditions for the entitlement of the rebates:

1. The individual (and only an individual) must acquire the residential complex as his or her primary place of residence or the primary place of residence of a relative of the purchasing individual.
2. The purchasing individual or his or her relative must be the first person to occupy the residential complex as the primary place of residence after it is substantially completed.

Where there is more than one individual acquiring the house, all the individuals must together satisfy the above conditions, meaning they must all acquire the property as their primary place of residence and must together be the first occupants of the property as their primary place of residence. Nevertheless, only one individual can claim the rebates.

In this case, none of the conditions were satisfied. Ms. Ram and Mr. Kumar purchased the house as an investment property, and neither of them nor any of their relatives occupied the house at any point in time. Thus, they were not qualified to receive the GST/HST new housing rebates.

The individual homebuyer can claim the rebates directly. However, the common arrangement between the builder and the homebuyer is that (i) the homebuyer signs the rebate application; (ii) the homebuyer assigns the builder the right to claim the rebates together with a signed declaration that the homebuyer is entitled to the rebates; and (iii) the builder submits the rebate application, claims the rebates and credits the rebates to the purchase price, which is reflected on the statement of adjustments upon closing. This was exactly what was arranged in this case.

It does not matter who signed the application

The rebate application was made in Ms. Ram's name. However, she contested that the signature on the application was not hers and suggested that Mr. Kumar signed in her place without her knowledge or consent. Mr. Kumar was not called in to testify to defend himself.

The Tax Court expressed great concern about Ms. Ram's credibility. According to the Court, Ms. Ram and her husband appeared evasive in answering the examination questions. Ms. Ram purposely withheld documents from the respondent and from the Court while insisting that all documents were provided.

The Court pointed to an email from Ms. Ram to Mr. Kumar right after she learned that she was being demanded repayment by the CRA. In the email, Ms. Ram did not appear to be surprised that the rebates were claimed; she only asked Mr. Kumar to bear half of the repayment. The Court also pointed to the fact that Ms. Ram did not report the capital gains on the sale of the house, opining that she was consistent in her conduct to avoid taxes on the transaction.

Although there was no way to either confirm or deny the authenticity of her signature on the application, the Court held that it did not matter. Because Ms. Ram signed other documents throughout the purchasing and closing processes and was aware that the purchase price was credited, she must have had knowledge of or consented to the matter and be liable to repay the rebates in full.

Sharing of repayment of the rebates is a civil matter, not a tax matter

The Tax Court reiterated the framework for GST/HST new housing rebates is that where there are multiple homebuyers, only one person can claim the rebates and only that claimant is liable to repay the rebates, if the claim is not warranted.

In the case at bar, Ms. Ram can initiate a civil proceeding against Mr. Kumar for his share of the liability, but the Tax Court does not have the power to split the liability for her.

The address on the rebate application was the correct address

Ms. Ram argued that the assessment for the GST/HST new housing rebates under the Excise Tax Act (ETA) was not sent to her address for income tax purposes under the Income Tax Act (ITA). An assessment sent to the wrong address is invalid. Therefore, she should not be liable for the interest accumulated since the original assessment and the resent assessment were beyond the normal assessment period of four years for rebates.

The Tax Court rejected this argument. The Excise Tax Act and the Income Tax Act are two different statutes. It is not uncommon for a taxpayer to have different addresses for income tax purposes and for excise tax purposes. Moreover, sending the assessment on the new housing rebates to the address provided on the rebate application is justified, because the claimant is required to occupy the house as his or her primary place of residence. Consequently, the original assessment was sent to the right address and was thus valid.

The assessment was not statute-barred because of misrepresentation

Even if the original assessment was sent to the wrong address, the Tax Court ruled that the assessment was not statute-barred.

The normal assessment period for rebates is four years after the rebate application was made. However, there are exceptions, one of which is where there is misrepresentation attributable to neglect, carelessness or wilful default.

In the case at bar, Ms. Ram applied for the rebate in July 2018 and received the notice of assessment at her residential address more than four years later, in February 2023.

Nevertheless, because Ms. Ram was not entitled to the rebates but applied to get the rebates anyway, there was misrepresentation attributable to neglect at the very least. The Court, however, implied that Ms. Ram was likely more than neglectful in the matter.

In conclusion, the Tax Court dismissed the appeal by Ms. Ram, holding that she was not eligible for the GST/HST new housing rebates. Therefore, she is fully liable to repay the rebates as well as the accumulated interest. The original notice of assessment was valid because the address of the house provided on the rebate application was the correct address for rebate purposes. Ms. Ram misrepresented on the rebate application and was subject to being assessed beyond the normal assessment period of four years for rebates.

David J Rotfleisch, CPA, JD is the founding tax lawyer of Taxpage.com and Rotfleisch & Samulovitch P.C., a Toronto-based boutique tax law corporate law firm and is a Certified Specialist in Taxation Law who has completed the CICA in-depth tax planning course. He appears regularly in print, radio and TV and blogs extensively.  

With over 30 years of experience as both a lawyer and chartered professional accountant, he has helped start-up businesses, cryptocurrency traders, resident and non-resident business owners and corporations with their tax planning, with will and estate planning, voluntary disclosures and tax dispute resolution including tax audit representation and tax litigation. Visit www.Taxpage.com and email David at david@taxpage.com.

Read the original article in full on Goods Services Tax. Author photo courtesy Rotfleisch & Samulovitch P.C. Top image: golden gavel, 3D Animation Production Company from Pixabay.