ARTICLE · 16 OCTOBER 2014

B.C. Supreme Court Rescinds Land Transfers

Dentons Canada LLP

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In Re 0741508 BC Ltd and 0768723 BC Ltd , the British Columbia Supreme Court considered whether rescission should be granted in respect of two real estate transactions.

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In Re 0741508 BC Ltd and 0768723 BC Ltd (2014 BCSC 1791), the British Columbia Supreme Court ("BCSC") considered whether rescission should be granted in respect of two real estate transactions in which the applicant corporations had transferred several parcels of land to a partnership.

The transactions were undertaken as part of a proposed commercial development of the land. The parties intended – in accordance with industry practice – that there would be no net GST/HST payable on the land transfers (i.e., the GST/HST payable would be offset by an input tax credit).

However, the partnership was not registered for GST/HST purposes under the Excise Tax Act ("ETA") and accordingly the input tax credit was not available. The CRA audited members of the corporate group and reassessed nearly $6 million in GST/HST and penalties.

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