Rental expenses incurred while under construction were to be capitalized

The taxpayers purchased a lot, constructed a house, leased it out for a year and then sold it at a gain. Regarding the computation of the ACB of the house for capital gains computation purposes, Laurin JCQ referred to the Quebec equivalents of ss. 18(1) and 18(3.1) to (3.3), and found (contrary to the ARQ view of these items as being of a personal nature) that the taxpayers were entitled to add the costs of the following items incurred during the construction period: municipal taxes, school taxes, insurance, electricity, interest on a line of credit and mortgage interest.

He considered the construction period to commence with the receipt of the building permit and to end with the point of substantial completion, being the point at which “there was some minor work to be done that did not prevent the house from being used for the purpose for which it was built.” He further found that “Expenditures after that date were current expenses that should have been deducted from income.

Neal Armstrong. Summary of Charron v. Agence du revenu du Québec, 2021 QCCQ 12137 under s. 18(3.1).