Home Builder Loses HST Case: Tax Court Looks Beyond the Claim of Personal Use

Salehi v. The King, 2026 TCC 139

Building a home and later selling it does not automatically mean the sale is exempt from GST/HST.

That lesson is reinforced by a recent Tax Court of Canada decision, Salehi v. The King, 2026 TCC 139.

The taxpayer constructed two new homes and later sold them.

CRA took the position that the taxpayer was a “builder” under the Excise Tax Act and that the sales resulted from adventures in the nature of trade.

The taxpayer disagreed.

The Taxpayer’s Position

For one property, the taxpayer argued that the home had been constructed for personal use.

For the other, he maintained that he was acting as trustee for his mother rather than developing the property for resale.

If those explanations were accepted, the GST/HST consequences could have been very different.

What the Court Found

The Tax Court examined the surrounding circumstances rather than simply accepting the taxpayer’s stated intentions.

It concluded that both properties had been acquired, redeveloped and sold as adventures in the nature of trade.

The taxpayer therefore met the GST/HST definition of a builder.

The sales were taxable.

A Costly Closing Certification

The second property raised another important problem.

At closing, the taxpayer certified that the sale was exempt from HST.

The Court concluded that the certification was incorrect.

Because the agreement treated any applicable HST as included in the purchase price, the taxpayer was ultimately responsible for remitting the HST that had effectively been collected.

This illustrates how wording in a real-estate agreement can have major tax consequences.

Why This Matters

CRA frequently reviews transactions involving:

• Newly constructed homes.
• Substantially renovated properties.
• Short holding periods.
• Multiple purchases and sales.
• Individuals claiming that a property was originally intended as a residence.

CRA and the courts look at the entire factual picture.

Simply stating, after a sale, that a property was intended to be a personal residence may not be enough.

Practical Lessons

Before building or substantially renovating a property that may later be sold:

• Determine the GST/HST consequences before construction begins.
• Document the genuine purpose for acquiring and building the property.
• Review the GST/HST wording in the agreement of purchase and sale.
• Do not certify that a transaction is exempt unless the tax treatment has been properly confirmed.
• Seek professional advice before closing.

Key Takeaway

GST/HST exposure on a newly built home can be significant—and the purchase agreement itself can determine who ultimately bears that liability.

Anyone constructing residential properties for eventual sale should address GST/HST planning before the sale is signed, not after CRA begins an audit.

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