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GST/HST — valuation of student residence

My client built a large building for students attending an Ontario university. Once the building was rented out, my client had to self-assess and remit HST on the value of the building.

My client had a professional appraisal prepared, using the "Income Approach", valuing the building at $16 million, and it remitted 13% HST on that value.

The CRA auditor accepted the appraiser's approach to valuation, but proposed to assess my client using the actual rents charged to students, not the local market rents shown in the appraisal report. The result would have been a valuation of $18.3 million, and over $300,000 more tax to pay.

I wrote to the auditor to explain why it was wrong to use the actual rents charged. The units were rented furnished, with furniture, household items and linens, which made the rents significantly higher than rentals of unfurnished units.

After review, the auditor agreed with me and let the original $16 million valuation stand.

Problem solved!

(2020)