Insight
Nov 26, 2025
Mackisen
CRA GST/HST House Flipping Audit — Montreal CPA Firm Near You: Defending Against Builder Classification, Business Income Treatment, and GST on Sale
A CRA GST/HST House Flipping Audit targets taxpayers who buy, renovate, and resell homes — or assign pre-construction units — within a short period of time. CRA aggressively audits these cases to determine whether:
• the taxpayer is a builder under the Excise Tax Act
• the sale is taxable for GST/HST purposes
• the profit should be taxed as business income rather than capital gains
• the sale triggers self-assessment rules under s.191
• rebates (NHR/NRRPR) were improperly claimed
• the flip was disguised as a “principal residence”
Mackisen CPA Montreal specializes in defending flipping audits by proving intention, use, and documented circumstances, while preparing complete CPA-certified audit files that dismantle CRA’s assumptions.
House flipping is one of CRA’s most high-risk and high-audit real estate areas.
Legal Foundation
Excise Tax Act s.123(1) — defines “builder,” “substantial renovation,” and “residential complex.”
Excise Tax Act s.165 — GST/HST on taxable real property.
Excise Tax Act s.191 — self-assessment rules for new or substantially renovated residential property.
Income Tax Act — business income vs capital gains reporting.
Case law:
• Cheema v. Canada — beneficial ownership determines tax liability.
• Chella v. Canada — intention at purchase controls GST/HST treatment.
• Tarnowe — occupancy and evidence govern rebate eligibility.
• McEachern — flipping can trigger builder classification.
Learning insight: Intention + timeline + evidence determine whether flipping is business activity — not just the contract.
Why CRA Audits House Flippers
CRA flags flipping activity when it detects:
• properties bought and sold within months
• repeated flips — suggest business activity
• renovations suggesting “new housing” classification
• principal residence claimed but never occupied
• GST/HST missing on sale of new or substantially renovated homes
• assignment sales without GST/HST charged
• mixed-use or partial Airbnb use
• mortgage approvals that indicate “investment property”
• marketing, staging, or MLS activity inconsistent with “personal use”
Learning insight: CRA assumes flipping is a business unless you prove otherwise.
CRA House Flipping Audit Process
CRA requests:
– purchase & sale agreements
– renovation invoices & building permits
– MLS listings
– occupancy evidence (utilities, insurance, ID address)
– correspondence with agents/contractors
– bank and mortgage files
– assignment documents (if applicable)CRA reconstructs a timeline of intention.
CRA decides whether you are a builder, flipper, or genuine homeowner.
CRA reassesses for GST/HST on sale + income-tax adjustments.
CRA denies rebates if occupancy isn’t proven.
Mackisen CPA builds a full factual defense.
Learning insight: CRA wins when documentation is missing. We win when documentation is overwhelming.
Mackisen CPA’s House Flipping Audit Defense Strategy
• prove original intention (personal use vs investment vs forced sale)
• defend against improper builder classification
• demonstrate actual occupancy with utility data, insurance, photos, ID records
• show non-commercial renovation motives (repair, safety, family need)
• prove life-event or financial hardship caused the sale
• correct GST/HST calculations where required
• defend principal residence and rebate eligibility
• prepare CPA-certified flipping audit binder aligned to CRA format
Learning insight: CRA must be shown why the property was sold — not just that it was sold.
Common CRA Findings in Flipping Audits
• taxpayer deemed builder → GST/HST becomes payable
• profit reclassified as fully taxable business income
• principal residence exemption denied
• rebate (NHR/NRRPR) denied for lack of occupancy
• substantial renovation reclassified as “new housing”
• GST/HST owing on assignment profit
• “personal use” claim rejected due to MLS marketing or staging
• missing documentation → CRA assumes commercial intention
Learning insight: CRA overreaches when intention isn’t documented — that’s where your CPA steps in.
Real-World Results
• A couple avoided a $256,000 GST/HST reassessment when Mackisen CPA demonstrated genuine personal-use intention with hydro usage, insurance, and school-registration evidence.
• An investor reversed a builder classification on a rapid resale caused by job relocation.
• A client kept their New Housing Rebate after we proved occupancy despite a short ownership period.
• A renovation project was reclassified correctly as non-substantial after we produced contractor statements and photos.
Learning insight: CRA’s assumptions collapse when your evidence is complete, chronological, and credible.
SEO Optimization and Educational Value
Primary keywords: CRA house flipping audit, GST/HST flipping audit, builder classification audit, Mackisen CPA Montreal, CRA audit real estate
Secondary keywords: principal residence audit, flipping tax audit, substantial renovation audit, GST housing audit, CRA reassessment real estate
Learning insight: Clear flipping-audit education builds authority with both Google and real estate investors.
Why Mackisen CPA Montreal
With 35+ years of real estate audit defense, Mackisen CPA Montreal is Québec’s leading authority on house flipping tax audits, builder classification, and GST/HST real estate law. Our bilingual CPAs win flipping audits by reconstructing intention, use, and timeline with unquestionable evidence.
Learning insight: House flipping audits are won on narrative proof + tax law — we master both.
Call to Action
If CRA is auditing your flip, assignment sale, or principal residence claim, contact Mackisen CPA Montreal immediately for a complete defense strategy.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com
Learning conclusion: A CRA GST/HST House Flipping Audit tests intention, use, classification, and documentation. Mackisen CPA Montreal ensures every element is proven, defended, and compliant — protecting you from six-figure reassessments.
