--------------------------------------------------------------------------- david ingram replies: Building or renovating a house and selling it ss generally considered a venture in the nature of trade whether you live in it while renovating or not. Selling it because the price was right is a direct example of a venture in trade and taxable at full rates. It would be different and could be tax free if you moved in and could not stand the neighbourhood or they changed public transportation or announced they were not building a school and the house did not fit your circumstances but if yuo just sold it for a good price, you can expect that the CRA might look at it. If you do two in a couple of years, you can be sure that the CRA will look at it. Goto www.centa.com and read the capital gains section in the TAX Guide section in the top left hand box to see what the courts have done in the past and help youo figure out what to do. The following two older answers will help you. If you sell this second house, you are putting yourself right in the line of fire from the CRA to go back and look at the first one. In Canada, the purchase and sale of any piece of real estate with or without renovations is considered a sale and subject to straight income tax unless: 1. It was bought for and clearly used as your personal residence and was intended to be used for an indefinite period of time which is usually in the five to ten year range. 2. It was bought as and used as a recreational property 3. It was bought for the purposes of earning long term rental income. In the case number 1, there is no tax. In the case of numbers 2 and 3, the sale is treated as a capital gain and only fifty per cent of the profit is taxed at your regular tax rates. Lots of / many (anyone caught) are taxed full tax rates when they buy a house, move in, fix it up and sell it a year or two later and then do another one. Of course, most are NOT caught in these circumstances. However, "any" flip is going to be straight income unless the person can prove that they bought it to live in and then: * married a person with three children and it is not big enough (had to sell and bought bigger) * were transferred to another city (had to sell to buy in new city) * lost their job, were injured, etc. and can no longer afford to move in. In this case, they would have to show that they had the finances to have paid for it when they bought it. (Not only can they not afford it but they have moved into their parents' basement (boomeranged). * Inherited a house from their parents and do not need it any more. (are living in the new house) You can read more by going to www.centa.com - click on tax guide in the top left hand corner and then click on the "capital gain" section. david This older q & A also gives an idea My daughter is closing on a presale Yaletown condominium this summer. She is working until Christmas in Alberta. She returns to Vancouver from Jan to May and if the job becomes a full time position, then she may return to Alberta to live. At the time of presale, February 2004, we thought that the suite would be assigned to her and that she would live in the suite. I was hoping that she could declare the suite as her permanent residence since she is only renting in Alberta and the work is not permanent. In May 2007, she could decide to keep or sell the suite. What does she need to do in order to qualify the suite as her permanent residence? ----------------------------------------- david ingram replies: There is no absolute answer because you can call a toad a frog all day long but it is still a toad. To be a principal residence and tax free for income tax purposes, the property must have been bought by her to live in and she HAS TO move into it. - No exceptions that I know of. You can expect that the CRA will be looking at "every" quick resale in EVERY downtown building. In deciding if it is a capital gain or a flip, the CRA will be looking at the suitability of the unit as a residence, the ability to pay for the unit and past and even future performance. In other words if she claimed this one as a principal residence and then did it again a year later, the CRA would have every right to go back and reclassify the first one. ------------------------------------------------------------------------------------------------- David Ingram wrote:
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