- within Tax topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- in United States
- with readers working within the Accounting & Consultancy industries
Introduction – Intention, Multiple Purchasers, and the Limits of the New Housing Rebate
In Gaitanis v. The King, 2025 TCC 186, the Tax Court of Canada addressed a recurring but often misunderstood issue in GST/HST litigation: how strictly the statutory conditions for the GST New Housing Rebate apply when a taxpayer acquires a newly constructed home jointly with a family member and claims to have acted primarily as a financial supporter rather than an intended occupant.
The decision reinforces that the rebate regime under Part IX of the Excise Tax Act in Canada is not driven by sympathy, familial motivations, or post-closing events, but by a precise and contemporaneous intention test anchored to the moment an agreement of purchase and sale is executed.
The appeal stemmed from the denial of a GST/HST New Housing Rebate claimed by Mr. Gaitanis for the purchase of a newly constructed residential property in Ontario. Although the taxpayer claimed that the property was bought for his niece and her children to live in as their primary residence, the Canada Revenue Agency (CRA) rejected the rebate because the statutory requirements in paragraphs 254(2)(b) and (g) of the Excise Tax Act were not met. Specifically, the CRA contended that all purchasers needed to have the required qualifying intention at the time of purchase, and that a niece does not qualify as a "relation" for the rebate provisions.
Instead of focusing on construction defects, rebate calculations, or resale mechanics, the case centred on a broader legal question with practical implications: whose intention is relevant when multiple individuals purchase a new home jointly, and can financial hardships or failed financing arrangements later excuse a failure to meet the statutory intention requirement?
Mr. Gaitanis contended that his role was essentially that of a co-signer or guarantor, and that his difficulty in securing long-term financing was a frustrating event that should exempt him from strict adherence to the rebate conditions.
The Tax Court rejected that position. Using established jurisprudence on intention, related persons, and multiple purchasers—especially under the pre-2021 version of subsection 262(3)—the Court determined that each purchaser had to independently meet the intention requirement when the purchase and sale agreement was signed.
The Court also reaffirmed that frustration cannot compensate for the absence of qualifying intent if that intent was never present in the first place. This decision sends a clear warning that good faith family assistance, conflicting testimony, and post-purchase developments do not override the strict statutory framework governing the New Housing Rebate.
Gaitanis is therefore not just a case about a rebate denial. It serves as a warning regarding evidentiary burden, statutory interpretation, and the risks taxpayers face when relying on family ties or altruistic motives under the GST/HST regime. For taxpayers and advisors handling new housing rebate claims—especially in joint purchase scenarios—the case highlights the importance of seeking early advice from an experienced Canadian tax lawyer to evaluate eligibility, structure transactions appropriately, and avoid costly tax reassessments that may not be rectifiable afterwards.
Intention at the Time of Purchase: Why Family Support Does Not Satisfy the Rebate Test
A central lesson emerging from Gaitanis v. The King is that entitlement to the GST/HST New Housing Rebate turns on a taxpayer's intention at a fixed and legally significant point in time: when the agreement of purchase and sale is executed.
Although paragraph 254(2)(b) of the Excise Tax Act does not explicitly refer to "intention," the courts have consistently interpreted the phrase "for use as a primary place of residence" as establishing a purpose-based test.
As the Tax Court reiterated, this inquiry is not satisfied by generalized statements of future possibility or benevolent motivations. Instead, the taxpayer must demonstrate, on a balance of probabilities, a clear, credible, and contemporaneous intention that the property be acquired as the primary residence of the taxpayer or a qualifying relation at the moment contractual liability arises.
The decision also underscores a recurring pitfall in family-assisted purchases: helping a relative acquire housing is not equivalent to acquiring a home for the use of a qualifying relation under the statutory scheme. In Gaitanis, the taxpayer's characterization of himself as a co-signer or financial backstop did not displace the legal reality that, as a purchaser, he was required to satisfy the intention requirement independently.
Where multiple individuals acquire a property under the pre-2021 version of subsection 262(3), each purchaser must meet the statutory test, and the definition of "relation" is narrowly confined by cross-references to the Income Tax Act.
Courts will therefore look beyond familial narratives and examine objective indicators—such as conduct, financing arrangements, and the consistency of testimony—to determine whether the requisite intention existed at the time of purchase.
Subsequent events, including financing failures or changed personal circumstances, cannot retroactively supply an intention that was never present at the time the agreement was signed.
Why Frustration and Post-Purchase Events Cannot Rescue a Failed Rebate Claim
A common argument raised by taxpayers denied the GST/HST New Housing Rebate is that unforeseen events after closing—such as failed financing, job changes, or market conditions—should excuse strict compliance with the statutory requirements.
In Gaitanis v. The King, the Tax Court clearly rejected this view, stating that frustration is not an independent ground for fixing a defective rebate claim. When the necessary intention under paragraph 254(2)(b) of the Excise Tax Act is missing at the time the purchase and sale agreement is signed, later developments are legally irrelevant. At a minimum, the taxpayer must prove qualifying intent at the outset; without qualifying intent, frustration has nothing to operate upon.
The Court highlighted that frustration may only be relevant in a narrow and specific set of circumstances—namely, when a taxpayer can show that a valid qualifying intention existed at the time of purchase but was later hindered by an external event beyond the taxpayer's control.
Even then, frustration does not, by itself, alter the statutory framework or turn an ineligible purchase into an eligible one. Instead, it simply influences the Court's assessment of credibility and evidentiary value. Gaitanis thus underscores a key limitation in GST/HST rebate litigation: equitable considerations and post-purchase explanations cannot substitute for contemporaneous intent, objective evidence, and strict compliance with statutory conditions.
If the initial intention fails, the rebate claim fails too—no matter how reasonable the taxpayer's later explanations seem.
Pro Tax Tips – Practical Guidance for GST/HST New Housing Rebate Claims
The Gaitanis v. The King decision illustrates that GST/HST New Housing Rebate claims rarely succeed or fail on grounds of fairness, family circumstances, or good intentions. Instead, outcomes turn on whether the taxpayer can demonstrate strict compliance with the statutory framework at the moment the agreement of purchase and sale is signed.
Taxpayers claiming the rebate must be able to prove contemporaneous qualifying intention, supported by objective evidence, rather than relying on after-the-fact explanations or post-closing developments such as failed financing or resale.
From a practical standpoint, taxpayers involved in joint purchases—particularly where one party views themselves as a co-signer or financial backstop—should approach rebate eligibility with the same level of care as any other high-stakes tax filing.
This includes clearly documenting the intention at the outset, understanding how the definition of "relation" applies under the Excise Tax Act and the Income Tax Act, and appreciating that frustration cannot repair an intention that was never present.
Engaging an experienced Canadian tax lawyer early in the transaction can be critical in identifying eligibility risks, structuring the purchase appropriately, and avoiding rebate claims that are vulnerable to reassessment and difficult to defend on appeal.
FAQ – Key Questions on GST/HST New Housing Rebate Disputes
1. Can a taxpayer rely on post-purchase events, such as failed financing, to preserve a New Housing Rebate claim?
No. Gaitanis confirms that post-purchase events are only relevant if a taxpayer can first establish that a qualifying intention existed at the time the agreement of purchase and sale was signed. Where that intention is absent, subsequent developments—no matter how reasonable—are legally irrelevant and cannot rescue an ineligible rebate claim.
2. Does helping a family member purchase a home automatically satisfy the rebate's intention requirement?
No. Courts will not equate family assistance with statutory eligibility. Each purchaser must independently satisfy the intention requirement, and only qualifying relations as defined by statute are relevant. Taxpayers who assume that acting as a co-signer or guarantor is sufficient face a significant risk of denial if their own intention is unclear, inconsistent, or unsupported by objective evidence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
