# Cap gains when intentions at time of purchase is to use



## Racer (Feb 3, 2010)

Hello folks,

Here's a hypothetical I'm wrestling with:

A buyer purchases two adjacent pieces of bare land with the intention of building a home on one of them. 

Time passes, and the buyer realizes they can't afford to build after all.

The buyer sells both properties for a small profit, 2-3 years after the date of original purchase, without any improvements made.

Does GST apply?


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## OhGreatGuru (May 24, 2009)

Is your question about capital gains or GST?


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## kcowan (Jul 1, 2010)

I think not.


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## Racer (Feb 3, 2010)

Oh dear, I just realized the error in my subject title.

Yes, I am looking at this only to see whether GST applies, not capital gains.

The legislation says that GST applies to a sale of land by an individual to another individual where:

-immediately before the land changes hands the land was capital property that was primarily used in a business, with a reasonable expectation of a profit, or

-the land was sold as part of a business selling land, or

-the land was sold as a result of an "adventure or concern in the nature of trade"

I think that one of the 2 properties is GST-taxable based on the third category, but not both. 

I just thought I'd throw this out here, as I haven't found an interpretation bulletin on this issue (but one surely must exist - I must be making a mistake here).


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## kcowan (Jul 1, 2010)

What about if you intended to build a personal use home on both lots? Intentions often count a lot with the CRA.


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## OhGreatGuru (May 24, 2009)

Suggest you submit your question to CRA. According to their info Sheet GI-003, a plot of vacant land that "had been kept for personal use" is exempt. But you bought two plots, so I suspect they would not agree that you would have a legitimate personal use for two building lots - only one.


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## tradervic (Nov 22, 2009)

No if the land was used for your personal use and enjoyment GST should not be applicable. However if you had two or more buildings lots severed from a parcel of land that you own then you are considered a land developer and GST would be applicable.


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## Racer (Feb 3, 2010)

Thanks for the replies. I'm drafting my ATR letter now!


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