New laws went into effect on January 1, 2023, and they could have an effect on you

This new law may have an effect on you if you purchased the property you are currently trying to sell within the last year. We

recommend that you consult an accredited professional accountant regarding your upcoming transaction to ensure that you are aware of your responsibilities.

An excerpt from Rosen Kirshen Tax Law by Jason Rosen and Marrie Shirzada outlines the new Anti-Flipping regulations.

NEW RULES AGAINST FLIPPING

The new rules against flipping would apply to residential properties that are sold after January 1, 2023. The federal budget that was released on April 7, 2022, included the announcement of this new measure. In the document, the federal government says that property flipping, or buying a house and selling it quickly for a lot more than you paid for it, is one reason why housing prices are so high. The goal of the proposed legislation is to ensure that all profits from flipping residential real estate are taxed equally for all Canadians.

When a person sells a house, the profits are typically treated as capital gains, and only half of the gains are subject to taxation. Additionally, individuals selling their primary residence can take advantage of a principal residence exemption. However, profits from flipping properties are subject to full taxation and are not eligible for the principal residence exemption or capital gains inclusion.

Currently, the Canada Revenue Agency (the "CRA") must demonstrate that the taxpayer intends to flip the property for profit in order to classify the proceeds of the sale as business income. However, the burden of proving this intention is removed by the proposed anti-flipping measure.

EXCEPTIONS TO THE NEW ANTI-FLIPPING RULES

Taxpayers who sell their homes within a year due to certain life circumstances are exempt from the proposed anti-flipping rules. The government also stated that the sale of the property would not automatically result in business income if the change in circumstances necessitated its sale. Here is a non-exhaustive list:

? Changes in life circumstances;

? Births of children;

? A new job

? Divorce;

? Death;

? Disability

The question of whether the property sale resulted in business income, a capital gain, or a capital gain that was eligible for the Principal Residence Exemption would be a matter of fact if any of the preceding conditions were true. In a property sale audit, an auditor will examine this factual issue. These have been going on for a long time, and given the exceptions made, it's likely that they will continue for a long time to come.