Casa Blanca Homes Ltd. v. R. – TCC: Assignment of Real Estate Deposit is not a Supply Attracting GST

Bill Innes on Current Tax Cases New Window

Casa Blanca Homes Ltd. v. The Queen[1] (October 25, 2013) involved the sale of the taxpayer’s interest under executory agreements for the purchase of land.  The sale divided the interests being sold between the taxpayer’s deposits on the land and the other rights of the taxpayer under the agreements being sold:

[3]             Of the 14 Purchase Agreements, the Appellant sold 12 to third-party purchasers (the “Assignees”) by way of a simple agreement binding these Assignees to fulfil the terms and conditions of the Purchase Agreements (the “Assignment Agreements”). The Assignment Agreements required the Assignees to pay two amounts. The first amount was a fee for the assignment of the Purchase Agreement (the “Assignment Fee”). The second amount was a payment equal to the value of the Deposit made under the Purchase Agreement (the “Deposit Recovery”). Altogether, the Appellant received $820,865 from the Assignees: $186,105 in Assignment Fees and $634,760 in Deposit Recoveries. Though the Assignment Fee and the Deposit Recovery were shown as separate amounts in the Assignment Agreements, each Assignee paid the Appellant with a single cheque.

[4]             The Appellant collected goods and services tax (GST) on the Assignment Fees only, and not on the Deposit Recoveries. The Minister of National Revenue (the “Minister”) reassessed the Appellant for the entire amount received from the Assignees. The issue in this appeal is whether the Appellant was required to collect GST on the full consideration it received. In other words, are the Deposit Recoveries subject to GST?

The court accepted the taxpayer’s position that the sale of the deposit was the sale of a “debt security”, therefore the sale of a “financial instrument” and hence exempt from GST.  In the alternative it held that the transaction was an assignment of a beneficial interest in money and therefore not a supply for GST purposes.

[25]        In summary, I am of the view that there are two supplies and each Deposit is a “debt security” and a “financial instrument”. The assignment of the Deposits can also be considered an assignment of a beneficial interest in money, which is not a “supply” within the meaning of the ETA. In either case, the consideration paid for the Deposit Recoveries is not subject to GST. This interpretation also avoids double taxation, which I believe, was not intended by Parliament. For these reasons, the appeal is allowed.

[1] 2013 TCC 338.