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GST/HST — home was built for family, not for sale, and company held it as bare trustee

My client “X” had a growing family and needed a larger home. He found a large lot on which he could build two homes, so the profit from selling one could help finance his new family home.

X’s company “Cco” took title to the property, and recorded in a Bare Trust agreement that it owned the west half of the land as bare trustee for X. Cco built a home on the east half of the land, sold it, collected HST on the sale and remitted it. Meanwhile X built his home on the west half at the same time, moved in, and was still living there 5 years later.

The CRA audited Cco, saw that it had built two homes on land it legally owned, had sold one and transferred title to the second completed home to X. The CRA assessed Cco for some $300,000 of HST, for not having collected HST on the second home (the one X lived in).

At this point, X came to me. I filed a Notice of Objection with CRA Appeals, explaining that Cco did not beneficially own the second property (X’s home), as it held it only as bare trustee. I included a copy of the Bare Trust Agreement, along with an affidavit I obtained from the lawyer who had created and witnessed the agreement in the first place, to show that the bare trust had been in place all along. I explained that a bare trustee has no liability for HST on selling a property; the liability rests with the beneficial owner. I also explained that X had built the home solely for him to live in with his family, and they were still living there five years later.

It took about 18 months for a CRA Appeals Officer to get to the file, but once he did, he quickly agreed with my submission and cancelled the $300,000 assessment.

Problem solved!

(2026)