16 Sep Condo Flippers Beware!
Author: Jeff Block
I start every morning perusing what is making headlines in the news, with particular attention given to tax topics. If I stay diligent, I plan to share some of the headlines I have found interesting during the past month or two.
An accountant I am – a blogger I am not. So, this may be the first and last article I write!
This past tax season, I had a significant increase in the number of my clients dealing with pre-sale condos and how they will be taxed if they:
(1) sold the contract before completion
(2) sold once completed
(3) moved-in and then sold at some future date.
Maybe that is why this article published on July 5, 2019 in the Financial Post by Jaime Golombek caught my interest.
The headline says it all: Condo Flippers beware: The taxman is watching you, and has new tools at his disposal to ‘take action’.
The 2019 federal budget announced a $50-million boost in funding over 5 years specifically targeting non-compliance in real estate transactions. The CRA is coming after taxpayers who inappropriately claim their principal residence tax exemption on real estate transactions. These taxpayers only truly have the intention of profit – aka “flipping”. If the CRA deems a sale “a flip”, the money made is 100% taxable and is not exempt from tax, or even a capital gain whereby only 50% of the gain is taxable. In this case, the CRA will deem the entire income as 100% taxable.
The determination of whether your real estate transaction is exempt, a taxable capital gain, or 100% taxable income comes down to the specific facts of each situation. If you are planning on selling real estate this year and are unsure of the tax consequences, give us a call, we are here to help.