In Feizmohammadi v. The Queen, 2017 TCC 28 the Tax Court of Canada held that the taxpayer’s condominium sale constituted income from a business. Tax Foresight correctly predicts the outcome of the Feizmohammadi case with 91% confidence.How consistent was this decision with prior decisions? Our Tax Foresight analysis of the case follows.In 2010, Feizmohammadi purchased a 560-square foot condominium. Less than two months after the closing, the taxpayer listed and resold the property. The triggering event occurred when the taxpayer omitted the condo’s disposition from his 2010 income tax return. The Minister assessed the disposition as business income. The taxpayer appealed.The main issue before the Court was whether the taxpayer’s family “ordinarily inhabited” the condo as their “principal residence”, within the meaning of subsection 54(a) of ITA, during the year in question.In support of his appeal, the taxpayer explained that the condo’s periodic vacancy was due to overseas travel. He also argued that his motivation for resale stemmed from the desire for more living space to accommodate additional family members.The Court, however, was troubled by Feizmohammadi's claims as there were several pieces of evidence that suggested the family had never actually moved into the condo. A questionnaire completed by the taxpayer, at the time of resale, indicated that he and his family did not reside in the condo, and instead tenants occupied the unit. Furthermore, the taxpayer’s hydro bills revealed either no electricity had been consumed at the condo or that someone else was being billed during the relevant time period.This case highlights the importance of establishing ordinary inhabitance, and the types of evidence that will be considered, when excluding residential sales from business income.
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