What Tax Implications Are You Facing When Selling Your Toronto Condo?
Lots of people take a look at real estate as an investment and in the past few years the area of interest has been in buying condos. For many the thought has been to buy these when the market is a buyer’s market and then sell or “flip” them when it becomes a seller’s market. Unfortunately the CRA has taken note that many property investors at all levels seems to have taken a keen interest in this mode of making some quick money. They are now taking a closer look at those tax payers who have indicated a substantial profit from this type of property venture.
What the CRA doesn’t take into consideration is the specific situation an individual may be in surrounding the sale of a condo that was invested in. A good example, is that some condo purchasing deals can take far more than a year to close. There can be all kinds of delays, especially by the developers and builders. It is not uncommon for a condo investor to put an offer in on a condo that hasn’t even been built yet. Then with months and months of delays, finally the deal closes. This could be 18 months to 2 years after the initial offer to purchase. Of course there is a good side to this, in that during this time the actual value of the condo has risen. So as soon as the deal closes the new condo owner immediately puts in on the market and looks forward to finally enjoying a return on the investment. The condo sells within a few days, and everyone seems happy. However even though this was deal in progress for many months, the CRA looks simply at the actual closing date for the initial purchase then the date for the re-sale, and in their viewpoint it is merely a property flip, which they are now looking at to tax you heavily on.
Without expecting it you may all of a sudden receive a letter from the CRA asking for additional information regarding the sale of your condo. The basis will be is their determining whether you condo was your principal residence and with what appears to be a “flip” this is not likely.
There are many rules and regulations when it comes to property investments. With the pressure being on the “CRA” to step up their efforts in collecting delinquent taxes they are becoming somewhat aggressive in this area and are looking at many different tax areas.
The best resource you have is your Toronto tax accountant who is well versed in property investments as they relate to tax implications.