How To Structure & Document Rental Properties So CRA Does Not Disallow Rental Expenses

In Blecha v The King, 2025 TCC 91, the Tax Court of Canada examined whether a taxpayer was entitled to claim deductions for expenses on a property he owned and said was being rented to his mother. The decision turned on whether the property was a genuine income-producing rental property or a personal-use residence.

Between 2015 and 2017, the taxpayer owned a small home in Wiarton, Ontario. During these years, his mother moved into the home and made regular payments to him. The taxpayer treated the property as a rental property, reported the payments as rental income, and claimed rental losses by deducting expenses related to the property.

The Canada Revenue Agency (CRA) disagreed with this characterization. After a tax audit, the CRA reassessed the taxpayer, disallowing the claimed expenses and reducing his reported rental income to nil. The CRA's position was that the property was not a bona fide rental property and that the payments did not constitute "income