Abbasi v. The King, 2026 TCC 183
A recent Tax Court decision shows why simply saying “I intended to live there” may not protect a gain on the sale of a home.
The taxpayer owned one Toronto home where she continued to live. She later acquired another Toronto property, renovated it and sold it less than a year after closing for substantially more than its purchase price.
She claimed the second property was her principal residence. She testified that she went back and forth between the properties, sometimes slept on a mattress in its basement and kept some personal belongings there.
CRA disagreed and assessed the gain.
⚖️ WHAT DID THE COURT DECIDE?
The Tax Court dismissed the appeal.
To qualify as a principal residence, the housing unit must be “ordinarily inhabited” in the year by the taxpayer, a spouse or former spouse, or a child.
The Court found that the evidence did not establish that the property was actually used as the taxpayer’s home:
She could not clearly identify when she moved in.
Her contact address remained at her other home.
Utility bills and most renovation receipts were in her brother’s name.
Witness testimony was inconsistent.
The property was undergoing substantial renovations and was initially not reasonably livable.
The Court also upheld late-filing penalties and rejected several additional amounts claimed when calculating the gains.
📌 IMPORTANT LIMIT
This decision does not establish a minimum occupancy period. The Court acknowledged that a short period may sometimes be sufficient and that a person can ordinarily inhabit more than one residence.
The taxpayer lost because the complete evidence did not credibly show ordinary habitation—not merely because she sold quickly.
💡 PRACTICAL LESSON
If a principal-residence claim may later be questioned, preserve evidence showing genuine occupancy:
✅ Address changes and government records
✅ Utility and insurance documents
✅ Moving and occupancy dates
✅ Furniture and day-to-day living arrangements
✅ Consistent testimony and supporting records
Renovating a property, keeping a few belongings there or occasionally sleeping there does not automatically make it a principal residence.
Before selling a recently acquired or renovated home, review both the principal-residence requirements and whether the gain could instead be treated as business income.
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