CCRA and Land Sales in Canada - David

Subject:        CCRA and Land Sales
Expert:         taxman at centa.com
Date:           Wednesday October 11, 2006
Time:           09:40 PM -0400
QUESTION:
Hello
I'm enjoying your informative tax broadcasts.
My question is:
How does CCRA get the information on the sale of a cottage? My buddy says
there is no real way and it is just up to the individual to declare a
capital gain if it is not your principal residence.
My instincts say that perhaps there is some connection between the
provincial land registries or similar entity for CCRA to get sale
information. Also there is property transfer tax in most areas, perhaps CCRA
uses something like this. Perhaps the GST paid as well.
Can you shed any light on our discussion?
Thanks so much
=====================================
david ingram replies:
I can usually figure out how the CRA gets their information. When a client
comes in with a CRA notice about an old sale, we can usually figure out who
turned them in. Many cases are the result of an irate neighbour, an old girl
friend, a spouse who thinks they got the short end of a divorce settlement,
a realtor who did not get the listing or lost the listing or even the
purchaser of the unit who thinks that they were taken in the deal.
I also know of specific times in the 70's when the CRA has had their staff
go through land records looking for sales and comparing them to tax returns.
At one time, they even attended at the Whatcom County courthouse in
Bellingham looking for Canadians selling land in Point Roberts, Sudden
Valley, and Sandy Cove in particular.
However, I do not believe that the CRA goes through land registry offices
anymore as they were censured several years ago for doing that very thing in
Kitchener, Ontario.
However, they have absolute access to multiple listing and sales figures on
the internet.
In the last three years, I have had experience with two clients where the
CRA caught up to them after the sale of houses.  In both cases they were
rentals that the owners had never reported and that had been sold to the
tenants. Because they had both had bad words and dissension with the tenant
purchasers, I can only assume that the tenants turned them in.  Remember
that the tenant does NOT need to know that the rents or sale were not
reported.  The tenant just has to write to the CRA anonymously and tell the
story. The CRA does the rest by auditing the taxpayer's tax returns and
asking for things like banking records and doing a net worth assessment.
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