Executive Summary: Key Legal and Evidentiary Issues

• Determination of whether the appellants qualified as "builders" under subsection 123(1) of the Excise Tax Act through engagement in an adventure or concern in the nature of trade

• Application of the six-factor test from Happy Valley Farms to assess whether property transactions constituted trading activity

• Whether the subsection 191(1) "self-supply" rules applied when the appellants occupied the newly constructed residence

• Availability of the subsection 191(5) personal use exception to exempt the appellants from GST/HST liability on the self-supply

• Credibility of the appellants' stated reasons for selling the property, particularly the bedroom layout justification

• Fair market value determination of the subject property at the time of self-supply for calculating GST/HST owing

Background and property transaction history

Dustin Caddell and Breanne Caddell, a married couple, appealed reassessments issued by the Minister of National Revenue on August 4, 2023, which found them liable for GST/HST on the self-supply of a newly constructed residence at 600 Tercel Court, Mill Bay, British Columbia. Between 2010 and 2021, the appellants purchased seven residential properties and sold five of them. Five of these properties were acquired as bare land, upon which the appellants constructed homes, occupied them, and subsequently sold four of them. The subject property was purchased on June 6, 2015 for $200,000 as bare land, a home was constructed under an owner-builder authorization, and it was first occupied on March 18, 2016. The property was first listed for sale in September 2016, and the appellants entered into a sales agreement on July 17, 2017 for $989,000 with an October 30, 2017 closing.

The appellants' position and justification for sale

The appellants argued they were not "builders" under subsection 123(1) of the Excise Tax Act because they did not construct the subject property in the course of a business or adventure in the nature of trade. Mr. Caddell testified that the primary reason for selling was the home's floor plan, which separated their toddler daughter's bedroom from the master bedroom because they had designed the house around their cats to separate them from the bedrooms due to their daughter's allergies. The appellants contended they used the property primarily as a personal residence and should qualify for the subsection 191(5) exemption from self-supply rules. They also submitted that the fair market value at the time of the alleged self-supply was $775,228, significantly lower than the Minister's assessment.

The Minister's position and reassessment basis

The respondent maintained that the appellants' pattern of purchasing seven properties and selling five within an 11-year period demonstrated engagement in an adventure or concern in the nature of trade. The Minister determined that the appellants made a self-supply under subsection 191(1) when they occupied the newly constructed home and did not qualify for the subsection 191(5) personal use exception because the primary use of the property was inventory rather than residence. The respondent asserted the fair market value was $915,000 at the time of self-supply, requiring the appellants to remit GST of $22,875.

Application of the builder test

The Court applied the six-factor test from Happy Valley Farms Limited v. R. to determine whether the appellants engaged in an adventure or concern in the nature of trade. The nature of the property was found neutral as it could serve as either a residence or inventory. The length of ownership of approximately two years, with the property listed for sale as early as six months after constructing the dwelling, was indicative of trading activity. The frequency of similar transactions—seven purchases and five sales over more than 11 years—strongly supported a finding of adventure in the nature of trade. The work expended factor was neutral since the appellants claimed they built the home for personal occupation. Other circumstances for sale, particularly the bedroom placement explanation, were given lower weight because Mr. Caddell was familiar with floor plans and visited the home almost daily while under construction. The motive factor was suggestive of trading activity given the appellants' prior profitable sales and early listing of the subject property.

Self-supply and personal use exception analysis

Having found the appellants were builders, the Court examined whether subsection 191(1) self-supply rules applied. All four requirements were satisfied: construction was substantially completed, the builders were individuals, they occupied the complex as a place of residence, and they were the first to do so after substantial completion. The Court then considered whether the subsection 191(5) personal use exception applied. Citing Lacina v. R., the Court noted that self-supply rules are designed to prevent a builder from gaining any advantage from occupying a residential complex, which is part of their inventory, for a short period of time before selling it. The Court distinguished Coates v. R., finding that case addressed a secondary intention to resell rather than a primary intention to sell for profit. The appellants' bedroom layout explanation was not accepted, particularly given Mr. Caddell's almost daily construction visits and familiarity with the floor plans.

Fair market value determination

Mr. Caddell presented a valuation of $775,228 based on comparing Mill Bay properties sold in 2015 and 2016 to their British Columbia assessed values and applying an average discount of 5.4% to the subject property's assessed value of $820,000. Ms. Mandeep Kandola, a qualified real estate appraiser with AACI, P.App. designation employed by the Canada Revenue Agency, conducted a formal appraisal using comparable properties in the same neighborhood of similar age and lot size, concluding the fair market value was $915,000 as of March 18, 2016. The Court accepted Ms. Kandola's appraisal, noting she is both educated and experienced in her work of appraisals. The Court also observed that the appellants' listing price of $969,000 on September 18, 2016 and sale price of $989,000 on July 17, 2017 were quite similar to Ms. Kandola's valuation, while Mr. Caddell's valuation was an outlier.

Ruling and outcome

The Tax Court of Canada denied both appeals. Justice Bruce Russell found that the appellants were builders engaged in a concern or adventure in the nature of trade, made a self-supply under subsection 191(1), and did not qualify for the subsection 191(5) personal use exception because the primary use of the subject property was inventory rather than residency. The Court accepted Ms. Kandola's fair market value assessment of $915,000, upholding the GST liability of $22,875 as determined by the Minister of National Revenue. The judgment, signed February 2, 2026, permits the parties to file representations regarding costs within 45 days of the judgment if sought.