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Taxman after condo owners

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Guest | 25 Mar 2014, 01:19 AM Agree 0

The Canada Revenue Agency (CRA) is reportedly cracking down on condo flippers, with hundreds of owners under audit and receiving penalties.
The CRA have undertaken a special ‘condo project’ to investigate sales transactions. Since last April, this project has led to almost 600 income tax audits with almost half of that number receiving penalties.
Speaking to CREW, Mark Weisleder, lawyer and real estate lecturer, says this has become a serious issue of late. “If you buy a new condo from a builder and flip it shortly after closing, firstly you may have to repay the HST rebate portion of the purchase price because you did not move in or rent it out,” he says. “This can be close to $30,000 in some cases. In addition, if you sell shortly after closing, CRA considers this business income and not a capital gain, so you will be expected to pay tax on the full amount of any profit made."
A number of factors are analysed by the CRA before applying a penalty, including the number and frequency of transaction and taxpayer’s circumstances and stated motivation to sell.
Weisleder advises condo owners to be "properly prepared" before arguing position with the CRA.
"The person must be able to demonstrate through appropriate documentation that they intended to move into the unit on closing in order to claim the HST rebate and to try and have the property classified as capital and not inventory or business income."
  • Sam Elgohary | 25 Mar 2014, 12:54 PM Agree 0
    Best Advise for investors , to make good money in Real Estate is a long term Investment not short terms and flipping times are gone

    now you have to

    BUY ----------- HOLD----------------------------------- SELL
  • Go Off | 25 Mar 2014, 03:50 PM Agree 0
    Since quite a few investors are now losing money on presale condos, does cra allow the lost as part of deductibles against income?
    NO? CRA cannot have it both ways! If it assess such gain as income, than it has to allow for loss too!
    This is a democracy, and all government agencies & departments Must be fair, and demonstrate fairness in their acts!
  • Alek Musulin | 25 Mar 2014, 04:10 PM Agree 0
    We make 16%+ annualized for our investors on short term investments only (6-12 months) and we do this time and time again, verifiable by third party reports. Additionally, all investments are fully secured by the underlying real estate and are fully insured on title and property insurance.

    Rather than tying up your money in an investment that has a greater chance of reducing in value over time, contact us for further details on how we can greatly improve your bottom like in a short time frame.
  • Alek Musulin | 25 Mar 2014, 04:30 PM Agree 0
    Be careful who your advice comes from.

    We make 16%+ for our investors in short 6-12 month holds. Why take a long term risk when there is no need?

    For more information contact me directly and see how we not only secure your investment with the underlying real estate but we also secure it in two different ways and guarantee your return.

    Almavesta Group is here to serve you.
  • Shelly Lederer | 26 Mar 2014, 01:15 AM Agree 0
    That is good, the investor should have known that that upon CPS & disclosure.
    On the other hand there should be tax credits for purchasing resale condos. Give incentive to help a suffering market.
  • Maryanne | 26 Mar 2014, 10:49 PM Agree 0
    @Sam Elgohary That's only partially true, although it may be correct that long term investments are a good option, short terms are not gone. We just flipped two houses in Calgary, AB and know many others who are continuing to be profitable. Both long and short term are hot right now.
  • Dennis Paradis | 27 Mar 2014, 03:36 AM Agree 0
    Safest way to "flip" a pre-construction condo is thru assignment. There are still taxes owed and the same income vs capital gains issues but you do avoid the HST rebate hit as you never take title and it's the new buyer who needs to qualify not you. For more info on assignments see my website dedicated to this specialized area of real estate.
  • Dennis Paradis | 27 Mar 2014, 03:46 AM Agree 0
    Safest way to "flip" a pre-construction condo is thru assignment. There are still taxes owed and the same income vs capital gains issues but you do avoid the HST rebate hit as you never take title and it's the new buyer who needs to qualify not you. For more info on assignments see my website dedicated to this specialized area of real estate.
  • rent to own | 30 Mar 2014, 11:35 AM Agree 0
    $30,000 ( 13% HST) it apply to all brand new condos, house . . .
    Profit is considers this business income and not a capital gain.
    This is 100% right.

    but you should not worry about this, IF you lose the money when you invest will be consider as capital lost.

    Not 1% of investor face the wrath of the taxman.
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