An investor's property sale was challenged as fully taxable business income. We established capital treatment, saving $46,000.
The CRA sought to tax a real estate investor's property sale as fully taxable business income rather than a capital gain, based on holding period and frequency. We documented the investment intent, rental history, and financing, and demonstrated the property was held to earn income. Capital treatment was upheld, saving roughly $46,000 in tax.
Real estate turns on the income-versus-capital question, the anti-flipping rule and GST self-supply on new residential construction.
A review is won on documentation created at the time, not on explanations offered afterwards. The CRA asks for the source records behind a figure, and an unsupported claim is simply disallowed.
Why it bites: Most reassessments we reverse are not the result of a wrong position — they are the result of a correct position with no contemporaneous paper trail behind it.
Planning has to be in place before the transaction. The salary-versus-dividend mix, the timing of a capital purchase and the choice of year-end all change the outcome, but only prospectively.
Why it bites: Almost every planning opportunity we see missed was available and simply not taken in time; very few are recoverable after year-end.
Every engagement above was priced as a fixed fee agreed before the work started, and paid only once the client had reviewed the result. If any of this looks like your situation, the first step is a free 15-minute call — we will tell you plainly whether there is anything worth doing.
Reviewed by Udit Gupta, Founder and Tax Accountant for the 2025 tax year. This case study is based on a real client engagement handled by Tax Filings Canada; the client's name and identifying details have been changed. Outcomes depend on your own facts.
Sources. CRA — Businesses · Income Tax Act (Justice Laws Website)
