Case Study: Mississauga 42-Unit Multi-Res Refinance Saves $214K Through Cost-Seg + CCA Re-File
Reviewed by Bader A. Chowdry, CPA, CA, LPA on
By Bader A. Chowdry, CPA, CA, LPA · Last updated July 30, 2026 · Reviewed July 30, 2026 · 5 min read
Quick answer: A 42-unit Mississauga multi-residential building held through an Ontario limited partnership with three non-resident LPs was being audited for prior-year CCA claims and NR6 withholding compliance. Restructure of CCA class allocation (cost-segregation study), Section 216 election filings for two mid-year-arrived non-resident partners, and a section 45(2) principal-residence election on a general partner’s converted unit yielded $214K aggregate tax savings and closed the audit no-adjustment.
This is a multi-residential refinance CPA Mississauga engagement — a 42-unit building, three limited partners, and two of them non-resident.
The challenge
An Ontario limited partnership held a 42-unit multi-residential rental building in Mississauga acquired for $8.4M in 2019. Partners: one Canadian resident general partner (5% GP interest), three limited partners — one Canadian and two non-resident LPs (holding 60%, 20%, and 15% respectively). Annual gross rent: $918K; annual net rental income before CCA: $410K.
CRA audit opened in January 2025 for tax years 2022-2024. Two audit issues raised:
- CCA misclassification. Prior CPA had allocated the full $6.9M of building cost (excluding land) to Class 1 at 4%. No cost segregation, no separate Class 1.1 election. First 5-year CCA claimed: $1.16M — far below defensible optimum.
- NR6 / Section 216 non-compliance. Two non-resident LPs had received quarterly cash distributions from the LP without any Part XIII withholding by the LP, and neither had filed Section 216 returns for 2023 or 2024.
CRA proposed reassessments totaling $147K plus $34K interest plus $18K gross-negligence penalty consideration on the second LP.
What we did
Insight Accounting CPA — led by Bader A. Chowdry, CPA, CA, LPA — engaged for both audit defence and prospective restructure over 8 months:
Audit defence:
- Voluntary Disclosures Program (VDP) filing for the two non-resident LPs’ 2023-2024 Section 216 non-filing — accepted by CRA, penalty waived, only interest owed.
- T1159 returns filed retroactively for both non-resident LPs for 2023 and 2024. Section 216 net-income treatment reduced their combined 2023-2024 tax liability by $89K vs. the CRA-proposed 25% gross withholding.
- NR6 undertakings filed for 2025 forward — property manager now withholds on estimated net income; expected 2025 withholding drops from $54K under default rules to roughly $9K.
CCA re-file:
- Cost-segregation study commissioned. Allocated $6.9M as: building shell $5.5M (Class 1 at 4%), HVAC + mechanical $520K (Class 8 at 20%), appliances + fixtures $680K (Class 8 at 20%), common-area IT/security $80K (Class 50 at 55%), landscaping/paving $120K (Class 17 at 8%).
- T2 amendments for 2022, 2023, 2024 to reflect the reallocation. Amended CCA claim over 3 years: $1.94M vs. previously claimed $780K. Delta refund at LP flow-through: $125K aggregated across partners.
Section 45(2) election:
- General partner’s daughter had occupied one unit as her principal residence 2020-2022, then it converted to rental. Section 45(2) election filed on her T1 to defer the deemed disposition on change of use.
“Cost-segregation is well-known in US commercial real estate; it is systematically underused on Canadian multi-residential. Combining it with Section 216 for non-resident partners and voluntary-disclosure filings is a $200K+ package for a mid-size LP.” — Bader A. Chowdry, CPA, CA, LPA
The result
| Item | Before (proposed CRA reassessment) | After Insight Accounting CPA re-file | Delta |
|---|---|---|---|
| CCA claimed 2022-2024 | $780K | $1.94M | +$1.16M |
| Federal + Ontario tax at flow-through | +$147K CRA proposed | -$125K refund | -$272K |
| NR6 / Section 216 for 2 non-resident LPs (2023-2024) | $89K CRA proposed | $0 (Section 216 net-income) | -$89K |
| Gross-negligence penalty | $18K proposed | $0 (VDP accepted) | -$18K |
| Interest | $34K | $28K (partial waived) | -$6K |
| CPA fees for audit + re-file | $0 | $52K | +$52K |
| Aggregate net saving | ~$214K |
Additional benefit: the LP now files a clean T5013 with correct CCA class allocation, and the NR6 undertakings ensure ongoing withholding compliance for the two non-resident LPs. The audit closed no-adjustment on the amended filings.
Relevant tax provisions
- Income Tax Act section 216 — Section 216 election for non-resident rental income.
- Income Tax Act section 212(1)(d) — default 25% Part XIII withholding on rent to non-residents.
- Income Tax Regulations 1100 + 1101 — CCA class allocation and separate-class election.
- Income Tax Act section 13 — recapture; section 20(16) — terminal loss.
- Income Tax Act section 45(1)(a) and 45(2) — change of use and deferral election.
- Voluntary Disclosures Program (Information Circular IC00-1R6) — penalty relief.
What this could mean for your building
If you hold a multi-residential building through an Ontario LP with non-resident partners and CCA has been on autopilot for 3+ years, you likely have both hidden refund opportunities (via cost segregation) and hidden CRA exposure (via NR6/Section 216 non-compliance). Insight Accounting CPA runs this diagnostic on every new multi-residential engagement.
Read the full Real Estate Investor CPA GTA pillar →
Frequently asked questions
Q: How long does the Voluntary Disclosures Program (VDP) process take?
A: Roughly 6-12 months from filing to acceptance. During the process, no penalty accrues on the disclosed non-compliance, but interest continues to accrue. Only qualifying disclosures (voluntary, complete, involves potential penalty, at least 1 year overdue) are accepted.
Q: Can I re-file T2 or T5013 to fix past CCA under-claims?
A: Yes, generally within 3 years of the original assessment (extendable to 6 with CRA discretion). CRA’s stated position: T2 amendments to increase CCA claims are accepted where the amendment is properly supported by cost-segregation or engineering evidence.
Q: Does the enhanced federal purpose-built rental GST rebate apply to this 2019-built building?
A: No. The 2023 enhanced rebate applies to construction started after Sep 14, 2023. Buildings under construction or completed before then use the standard NRRP rebate rules — up to $6,300 federal + $24,000 Ontario per qualifying unit.
Q: What about the general partner’s active-vs-passive income characterization?
A: Rental income from a passive multi-residential hold is generally passive investment income at the corporate level, not active business income. Section 129(4) “specified investment business” definition matters. A GP corp of a passive rental LP typically does not qualify for the small business deduction on its GP share.
Important — informational only, not advice. Do not use this article to make any decision.
This is a composite case study — the facts are aggregated from two separate Insight Accounting CPA engagements between 2024 and 2026. All client-identifying details are anonymized. The tax mechanics and outcome ranges are real. This article is published by Insight Accounting CPA Professional Corporation for general educational purposes only. It is not tax, legal, accounting, financial, or investment advice, and nothing in this article should be relied upon — by anyone, for any purpose — to make a business, tax, financial, accounting, legal, or investment decision.
Tax law, CRA administrative positions, court interpretations, and Ontario provincial rules change frequently, sometimes retroactively, and the content of this article may be incomplete, simplified, out of date, or wrong by the time you read it. The right answer for your specific situation depends on facts this article does not know — your structure, history, jurisdiction, filings, contracts, and goals.
Before acting, engage your own Chartered Professional Accountant or qualified advisor who has reviewed your specific circumstances in writing. Insight Accounting CPA Professional Corporation, the author, and any contributors expressly disclaim all liability — direct, indirect, or consequential — for any action taken or not taken on the basis of this content.
Insight Accounting CPA Professional Corporation is led by Bader A. Chowdry, CPA, CA, LPA — licensed by CPA Ontario under the Public Accounting Act, 2004. To engage us for situation-specific advice, book a free 30-minute discovery call.
Additional CRA & Government Resources
Source: CRA — Classes of Depreciable Property.
Source: CRA — GST/HST New Residential Rental Property Rebate.
Source: CRA — Corporation Income Tax Return.
