Happy Valley Farms Ltd. v MNR, [1986] 2 CTC 259, provides a handy list of the factors a court will generally consider in deciding whether a gain realized on the sale of a home was on income account. The Court in Hansen v R, 2020 TCC 102, applied those factors to decide that gains on homes sold in statute-barred years could not, but that gains on two homes sold in open years could, be reassessed to treat the gains as having been on account of income. The Court found that the taxpayers had a secondary intention to sell the two homes at the time they were purchased. The taxpayers had purchased a lot to build a larger residence before buying the two homes in question, and they upgraded the two homes not only for their personal comfort but to increase the resale value of the homes.
Tataryn, Katlai and Bradford “Principal Residence or Income Property? The Happy Valley Test” 21:4 Tax for the Owner-Manager (October 2021)
