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GST — townhouse renovations

My client was an individual in Western Canada who, with her husband, purchased some rundown townhouses, fixed them up, and sold them. She received a letter from a Revenue Canada auditor proposing to assess her $200,000 for failing to collect GST on the sales. Not knowing what to do, she sat on the letter for a while, obtained an extension of time to reply, and finally called a lawyer two days before the extended deadline ran out. The lawyer referred her to me.

I reviewed the correspondence and all the facts with her, and concluded that the proposed assessment was incorrect because she had not "substantially renovated" the townhouses. I got her to fax me various supporting documents, and overnight wrote a 12-page letter to the auditor explaining why there had been no substantial renovation. In addition, I provided a detailed technical analysis showing that even if there had been a substantial renovation, no tax would apply due to the specific wording of the Excise Tax Act.

The auditor agreed with my submission and withdrew the proposed assessment.

Problem vanished!

(1997)