no tax,

My question is: Canadian-specific
QUESTION: If you buy a pre-sale condo, and flip the contract, is that 100%
taxable or is it viewed as a capital gain?
---------------------------------------------------------------------------
david ingram replies:
In Canada, the buying and selling of any piece of real estate is a venture
in the nature of trade and any profits are taxed at straight rates of tax
unless there is something that changes the nature of the transaction.
1.  If you buy a house, condo, townhouse, or a ski chalet or waterfront
cabin and live in it as your residence, it is tax free in Canada.  If you
have a house AND a cabin or ski chalet, you can claim one or the other tax
free but then the profit on the other is taxable during the same period of
time.  You can see the formula by going to the CRA site and looking up form
T2091 and its instructions
2.	If you buy a house, apartment block, farm, cabin, chalet, condo or vacant
land for a purpose such as vacation, rental, farming, or a parking lot, the
sale in the future is treated as a capital gain and only one half of the
profit is taxable.
3.	If you buy a piece of property and immediately put it up for resale or
fix it up and sell it, any profit is treated as straight income and is NOT a
capital gain item.
However, if you bought a prebuild sale studio apartment two years ago with
the honest and genuine intent to move into it when you were single, without
a care in the world and in the meantime have fallen in lust and are about to
be the parent of twins and a studio apartment will just not cut it and you
are buying a three bedroom townhouse to live in, then the sale before moving
in could likely be considered to be a capital gain, rather than straight
income.
This older q & a gives a slightly different slant on the same topic
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.
================================
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