Constantin v. R. – TCC: Five properties held for an average of nine months gave raise to gains on income account

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Constantin v. The Queen (November 6, 2014 – 2014 TCC 327) is an example of what is commonly referred to as a “trading case”. Ms. Constantin disposed of real estate at a profit in each of her 2007, 2008 and 2009 taxation years. The five properties she disposed of were held for an average of nine months each. She treated the profits as capital gains; the Minister assessed them as being on income account.

Not to put too fine a point on it, the Tax Court simply did not accept Ms. Constantin’s evidence that she acquired the properties as long term investments:

[24] On the facts, I see nothing that would lead me to believe the appellant’s version that she intended to build a diversified retirement portfolio with the assistance of two or three income properties. The facts and the appellant’s actions instead tend to demonstrate that the appellant’s first intention was to make short‑term investments. As a rule, the appellant financed her acquisitions of immovables through a closed one‑year hypothec only.

[25] The other argument put forward by the appellant that she resigned herself to sell the immovables acquired in the Eastern Townships because of her mother’s illness does not hold up because she was not managing those immovables herself. Vincent Beauregard managed those immovables. The appellant could easily have kept those immovables as she did with her cottage located at 18 Du Ruisseau in Orford-sur-le-Lac that she had owned since 2002.

[26] For the same reason, I do not believe that the decision made in 2008 to move to the Eastern Townships was the real reason for selling the immovables on Montréal’s South Shore because the appellant was not involved in managing those immovables. The three immovables were managed by Paul‑André Huart.

[27] For these reasons, the appeals are dismissed.