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Published: September 7, 2023

Last Updated: September 19, 2023

Client’s Situation:

Rotfleisch & Samulovitch PC, Canadian tax lawyers in Toronto, were retained by a property investor who intended to purchase a property that needed renovation. As a result of problems with the documentation, our client and her partners were assessed for HST in the amount of $459,286.

To raise funds, our client entered into a partnership agreement with four other individuals and purchased the property via a corporation created under the partnership’s ownership. Once the renovation was completed, the taxpayer decided to buy the property from the other four partners and made payments to each of them directly.


These partnership arrangements and documentation were all made without prior tax planning or consultation with a Canadian tax lawyer so the documentation of the transactions was inconsistent. The Agreement of Purchase and Sale between the taxpayer and her partners indicated the taxpayer

purchased the property from the corporation, while the Full and Final Release indicated the other four partners were the transferors. The CRA seized on these documentation inadequacies and then assessed the corporation for GST/HST on the sale of the property and reassessed the four other partners for the total amount of $459,286 under s.325 of the Excise Tax Act, which imposes joint and several liability for the unpaid GST/HST on the transferee where a person transfers property at less than fair market value on a non-arms length basis.

Our Approach:

Our experienced Canadian tax lawyers filed detailed notices of objection on behalf of the other four partners and made additional substantive and lengthy 52-page submissions in response to the appeals officer’s request to demonstrate that, despite the documentation inconsistency, the reality of the transaction was that the taxpayer only purchased the partnership and share interests from the other four individuals. Therefore, there was no taxable supply (sale in GST/HST language) hence no GST/HST should be owing.

The Result:

After three years and six months from the date we filed the notices of objection, the CRA finally allowed our objections in full and reversed the previous assessment for $459,286.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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