Salehi, 2026 TCC 139: two Toronto rebuilds were adventures in the nature of trade, and a vendor who certifies a sale as exempt is deemed to have collected the HST

2026 TCC 139 · Tax Court of Canada

Author: Sas Tullo

This is a general procedure HST appeal about an individual who bought, demolished and rebuilt two Toronto houses within four years and sold each within months of completion. The CRA assessed him as a builder: on the first house under the self-supply rule, because he briefly moved in, and on the second on its sale to a corporation. The Tax Court dismissed both appeals with costs. Beyond the familiar finding that the projects were adventures in the nature of trade, the judgment decides two points of wider importance: a vendor who signs the usual closing declaration that a sale is exempt is deemed to have collected the tax, and a purchase price that is HST-inclusive if tax applies means the vendor collected tax in error and must remit it, even where the buyer was a registrant who should have self-assessed.

Facts

The appellant, an engineer who built a metal railing business, has lived since 2003 in a Yonge Street condominium with his wife (paras 3-4). In July 2013 he bought 58 Walder Avenue as tenant in common with his wife’s second cousin, Ms. Emami; the lot had severance approval and building plans, the old house was demolished and two mirror-image detached houses were built on 58 and 60 Walder (paras 13-16). The appellant said he moved in around July 2014; the house was listed four days after the occupancy permit issued in August 2014, sold in October and closed on October 29, 2014, and Ms. Emami listed 60 Walder the same day (paras 17-18 and 40). The family said the plan to live there collapsed because of marital suspicions involving Ms. Emami (para 36). The sale included a two-year builder-style warranty (para 51). In July 2015 the appellant, or on his account his mother, bought 17 Dunblaine Avenue; title went to him alone with a one-year mortgage, he demolished and rebuilt it, no one moved in, and it sold in March 2017 to Heritage Seven Properties Limited, an HST registrant, under a contract providing that any HST was included in the price and on a statutory declaration that the supply was exempt (paras 85-86, 102, 141, 144 and 153).

Issues

Whether the appellant was a builder of each house within subsection 123(1) of the Excise Tax Act, that is, whether he built in the course of an adventure in the nature of trade; whether the self-supply exception in subsection 191(5) applied to 58 Walder; whether he held 17 Dunblaine as trustee for his mother so that the wrong person was assessed; and whether subsection 221(2) relieved him of any liability on the Dunblaine sale because the purchaser was a registrant (paras 1, 9-11 and 129).

Holding

Both appeals were dismissed with costs (paras 170-171). Each house was built for resale as an adventure in the nature of trade (paras 80 and 125). The brief occupation of 58 Walder was window dressing, so subsection 191(5) did not apply (paras 57 and 84). No trust existed over 17 Dunblaine, and a trust would not have changed who was liable (paras 135-139). Section 194 deemed the appellant to have collected tax on the Dunblaine sale, and in any event the HST-inclusive price meant he collected an amount on account of tax that he had to report and remit (paras 145 and 169).

The court’s reasoning

Ezri J. applied the Happy Valley Farms factors (para 12) to each property. On 58 Walder the decisive points were the minimal period of ownership after the house became habitable, which is what matters under Wall v. R, 2021 FCA 132, at para 40 (para 17); the coordinated listing of both houses (para 18); the organized construction under a person the court inferred was acting as general contractor (paras 26-30); the wife’s complete absence from the design and from title (paras 34 and 43); a single mortgage over both lots that made sense only as a combined project to be sold (para 44); a change of address filed with the Ministry of Transportation before the footings had passed inspection (paras 48-50); and the warranty, which the court found was offered to compete on the new home market (para 52). The marital explanation for the sale was rejected as a pretext, largely because 60 Walder was listed the same day (paras 40-41), and a negative inference was drawn from the failure to call Ms. Emami (paras 75-79).

On subsection 191(5), the court treated Coates v. R, 2011 TCC 74, with caution: the provision asks whether the home was used primarily as a place of residence and not primarily for any other purpose, the relevant facts overlap with the Happy Valley analysis, later cases have not endorsed Coates, and Lacina v. R, [1997] CarswellNat 1563 (FCA), confirms that the rule exists to deny a builder any advantage from occupying inventory (para 55). The evidence of occupation failed on its facts, notably the absence of hot water until late September 2014 (paras 60-71). The court also warned that wholesale redaction of electronic messages tendered in evidence should not be countenanced (para 67).

On 17 Dunblaine the court found the mother’s role contrived (paras 94-104 and 132) and listed the defects of the trust declaration signed by the appellant on both sides, dated retroactively to a time when no trust was needed, describing him as a bare trustee and unwitnessed (para 134). Even a valid trust would not help: subsections 267.1(2) and (3) make the trustee liable and subsection 299(4) preserves an assessment despite an error as to capacity (paras 136-137), consistent with the Federal Court of Appeal’s warning in Cheema against searching for the real owner, 2018 FCA 45, at paras 110-111 (para 138). Finally, although subsection 221(2) relieves a vendor from collecting tax from a registered purchaser, section 194 deems a vendor who incorrectly certifies in writing that a supply is exempt to have collected the tax; the declaration need not name the exempting section (paras 145-149). Independently, the HST-inclusive clause, read in light of Stanziano v Wolfe, 2022 ONSC 3823, and paragraph 154(2)(a), meant the appellant received 13/113 of the price on account of tax, which paragraph (a) of element A in subsection 225(1) required him to include in net tax and remit (paras 158-169).

Practical implications

The builder findings follow Wall, Lacina and Caddell, illustrating again how coordinated projects, short mortgages, premature address changes and builder warranties are read as indicia of trade. The lasting significance of the decision lies in the Dunblaine analysis. Vendors who sell to a registrant often assume that subsection 221(2) ends their exposure. This judgment holds otherwise where the vendor has signed the standard exempt-supply declaration, and it does so on a reading of section 194 that does not require the declaration to identify a specific exempting provision. In my view that reading is correct and will be followed; the alternative would let a vendor escape the consequences of a false certificate by drafting it loosely (para 149).

The HST-inclusive pricing point deserves equal attention from real estate lawyers. Where a sale turns out to be taxable, the clause converts part of the price into an amount collected on account of tax, and the vendor must remit it whether or not the purchaser could have self-assessed. The court raised this issue itself, relying on CSX Transportation Inc. v ABB Inc, 2022 FCA 9 (para 152). Whether an appeal was taken is not verified here.

Anyone who buys a house to demolish and rebuild should assume the CRA will treat a quick sale as a trade, and anyone closing a sale of new or substantially renovated housing should read the HST clause and the closing declaration as documents with tax consequences of their own, not as boilerplate.

This comment is general information, not legal advice. The law may have changed since the decision; check the current text in the tax wiki.

Citation and links

Amir Salehi v. His Majesty the King, 2026 TCC 139, judgment of 28 July 2026 (further amended reasons signed 15 September 2026), Ezri J., general procedure, court file 2022-31(GST)G. Reasons on the Tax Court’s site. Also on CanLII. This was a first-instance appeal from a notice of assessment dated May 19, 2019; there is no decision under appeal.