Taxman after condo owners

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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's sister publication, Canadian Real Estate Wealth, 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 said. “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."

  • Angela Wong-Liao - Invis Inc on 2014-03-26 12:57:24 PM

    I applaud CRA for being prudent and conduct thorough audit for condo investors as it is tempting for condo investors to flip the new unit before condo registration and closing.

  • Manny Shevitz on 2014-03-31 12:34:28 PM

    Maybe CRA should also look at the money laundering done "renting out" condos (& other vacant real estate). All those closed, but not occupied, condo units make it very easy for the "bad guys" to declare dirty money as "rental income". A condo that may have a real market rent of $1500/month, is left vacant & the launderer declares he is getting $3000./month in rental income. Dirty cash is deposited into the "landlord's/money launderer's" bank account as rental income. Mortgage payments, taxes, condo fees, insurance are tax deductions, launder to your hearts content, sell the unit at a profit & pocket the capital gain( less taxes of course).
    Isn't this a great country?

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