CANADA’S NEW ANTI-FLIPPING RULES FOR RESIDENTIAL REAL ESTATE
Come into force on Jan. 1, 2023
Designed to “reduce speculative demand in the market place and help to cool excessive price growth.”
Disallow the use of the principal residence exemption (PRE) to shelter the capital gain realized on the sale of your home if you’ve owned it for less than 12 months (specifically, 365 consecutive days)
Gain will be 100 percent taxable as business income.
Allows for certain exceptions such as death, disability, separation and work relocation
Flipping has been defined in government documents as “purchasing real estate with the intention of reselling the property in a short period of time to realize a profit.”
For PRE - requirements must be satisfied, such as actually owning the home, and living in it for at least part of the year by the individual (or their spouse, common-law partner, or child).
Capital Gains Vs. Business Income on the sale of a property
If property was purchased for the purposes of flipping, assignment, or buying to build and sell, the profits on the sale of the property are generally taxed as Business Income.
If purchased to generate rental income, profits on the sale would be taxed as capital gains.
Generally, capital gains are only included in income at 50%, so they are taxed lower than business income.
This means the gain, less any associated expenses will be fully taxable in the year of the sale, just as though the seller earned the money in other employment.