My question is: Canadian-specific QUESTION: My sister bought recreation property in BC for $100,000 ten years ago. Now she wants to sell at $200,000. Her capital gains would be at 50% of the profit? My question is if i bought if from her privatley for 200k and put my name on title and later take hers off. When I sell the property for, say $250,000 in 6 months or so, what would be my capitol gain? --------------------------------------------------------------------------- david ingram replies: If it was a capital gain, you would pay tax on 1/2 of $50,000. HOWEVER If you are buying for $200,000 intending to sell in six months, you likely do NOT have a capital gain. You are buying with the intention of flipping and "flipping" is taxable at straight tax rates. The $50,000 profit would go on line 135 as a business. Go to www.centa.com and read the Capital Gains chapter in the "Tax Guide" section in the top left hand box. The following older question and answer will help as well. --------------------------------------- A "friend" who is a BC realtor and has your same question presented to her from time to time recently attended a seminar that was related to this subject. As a result she was able to provide me with some interesting thoughts to ponder concerning "intent" and "professional background" when it comes to "flipping houses" and tax in Canada. You may possibly be looked at as a Developer with all the subsequent tax implications. Read the full article at <http://tax.centa.com/comment.php?mode=view&cid=8> ---------------------------------------------------------------------------- david ingram replies: 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's US / Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists My Home office is at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation in connection with personal or business affairs such as at www.centa.com <http://www.centa.com> . If you forward this message, this disclaimer must be included." Be ALERT, the world needs more "lerts" David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority. 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