The federal government of Canada recently came up with a new tax proposition to extend the tax that it applies on house flippers. According to this, the flipping rule would set with a 12 month holding period, after the taxpayer who got into the agreement of sale and purchase acquires property ownership.
All the profits that are generated from the assignment of sale would be considered as business income, instead of capital gain, in case if the right to purchase the property were assigned after owning the property for under 12 months. This new tax rule was proposed along with the 2022 federal budget. Hence, all people who sell a property within just 12 months of acquisition will be restricted from flipping it, unless an exception is provided for it.
All the exceptions to anti-flipping would be applicable on the Canadians who will encounter few life circumstances. They include disability, serious illness, death, divorce, relocation, loss of job, threat to personal safety, insolvency, or property destruction.
In all other instances, profit that is generated from the sale of residential property within a period of 12 months would be subjected to tax, while being considered as business income. Hence, it will not be eligible for the principal residence exemption or 50% capital gains rate. This would also be related to the disposition of a flipped property, which does not result in a non-capital loss.
This new anti-flipping proposal would be in effect from 1st January 2023. Therefore, anyone who is looking forward to flip a house should keep the fact in mind.
The federal government of Canada recently came up with a new tax proposition to extend the tax that it applies on house flippers. According to this, the flipping rule would set with a 12 month holding period, after the taxpayer who got into the agreement of sale and purchase acquires property ownership.
All the profits that are generated from the assignment of sale would be considered as business income, instead of capital gain, in case if the right to purchase the property were assigned after owning the property for under 12 months.
This new tax rule was proposed along with the 2022 federal budget. Hence, all people who sell a property within just 12 months of acquisition will be restricted from flipping it, unless an exception is provided for it.
All the exceptions to anti-flipping would be applicable on the Canadians who will encounter few life circumstances. They include disability, serious illness, death, divorce, relocation, loss of job, threat to personal safety, insolvency, or property destruction.
In all other instances, profit that is generated from the sale of residential property within a period of 12 months would be subjected to tax, while being considered as business income. Hence, it will not be eligible for the principal residence exemption or 50% capital gains rate. This would also be related to the disposition of a flipped property, which does not result in a non-capital loss.
This new anti-flipping proposal would be in effect from 1st January 2023. Therefore, anyone who is looking forward to flip a house should keep the fact in mind.