Executive Summary: Key Legal and Evidentiary Issues

• The dispute centered on whether profits from 18 property sales were taxable as business income or as capital gains.

• The taxpayer argued the properties were acquired for long-term investment, but the court found the evidence pointed to a speculative resale strategy.

• Revenu Québec’s factual assumptions were supported by patterns of short-term holdings, tenant evictions, and rapid renovations.

• The taxpayer failed to rebut the presumption of validity of the reassessments under Article 1014 L.I. with credible or consistent evidence.

• Contradictory testimony and absence of key witnesses led to adverse inferences against the taxpayer.

• The court ultimately qualified the income as business revenue, dismissing the capital gain characterization.

Facts of the case

In Gignac v. Agence du revenu du Québec, the plaintiff, Vincent Gignac, challenged tax reassessments issued by Revenu Québec for the 2011 to 2014 tax years. At issue was whether gains from the sale of 18 properties during this period should be taxed as business income or treated more favorably as capital gains. Mr. Gignac, a licensed real estate broker since 2001, asserted that the properties were intended for long-term rental investment, forming part of a growing real estate portfolio.

Revenu Québec disagreed, concluding the transactions bore the hallmarks of a commercial resale activity. It pointed to Mr. Gignac’s short holding periods, the systematic eviction of tenants, immediate renovations, and rapid resale of the properties—many of which were converted into undivided co-ownerships (copropriétés indivises) before being sold. Several properties were flipped within months of purchase.

Court’s analysis and findings

The Court of Québec, presided over by Justice Louis Riverin, applied the legal framework set out in Article 128 of the Loi sur les impôts (L.I.) and relevant case law to determine the true nature of the income. The court reiterated that reassessments by Revenu Québec are presumed valid under Article 1014 L.I., and the burden lies on the taxpayer to rebut that presumption with sufficient and credible evidence.

The court reviewed multiple criteria used in tax jurisprudence to distinguish between business income and capital gains, including the taxpayer’s intent at the time of acquisition, the frequency and pattern of transactions, the nature and extent of renovations, the length of ownership, and the commercial context. Mr. Gignac claimed the property on Querbes Avenue was initially meant for rental income, but the court found his testimony inconsistent and unsupported by documentary or third-party evidence. His explanation shifted during proceedings, and key witnesses such as buyers of the properties did not testify.

Justice Riverin noted that Gignac’s financing method—a revolving line of credit repaid rapidly after each sale—along with significant renovation investments that could not be recovered through rent in a low-income area, strongly suggested a resale intention. Furthermore, the court found that Mr. Gignac’s overall conduct, including late filings, vague record-keeping, and omission of key disclosures, undermined his credibility.

The court dismissed Mr. Gignac’s argument that the Querbes property sale was isolated from his broader strategy. It concluded that even if the sale was triggered by unsolicited offers, his conduct met the legal threshold for characterizing the transaction as part of an ongoing business activity. This included a finding of secondary intention to resell at a profit, consistent with a commercial project.

Outcome and procedural posture

The Court of Québec allowed the action in part, confirming Revenu Québec’s classification of the profits from the Querbes Avenue property as business income rather than capital gains. While the judgment defers to the Minister for the final adjustment of amounts based on the court’s findings and the parties’ admissions, it ultimately supports the tax authority’s position. No costs were awarded.

The decision affirms the principle that real estate resale activities, even if claimed to be investments, may constitute business income when the surrounding facts suggest a commercial intent. Taxpayers engaged in multiple transactions must be prepared to provide detailed, consistent, and credible documentation to justify capital treatment.