The CRA is already challenging real estate transactions ahead of new anti-flipping rules
Canada’s new anti-flipping rules for residential real estate are scheduled to come into force on Jan. 1, 2023, and are designed to “reduce speculative demand in the market place and help to cool excessive price growth.”
The new tax law will disallow the use of the principal residence exemption to shelter the capital gain realized on the sale of your home if you’ve owned it for less than 12 months, allowing for certain exceptions such as death, disability, separation and work relocation. Instead, the gain will be 100 per cent taxable as business income.
But the Canada Revenue Agency isn’t waiting around for this new legislation to come into force. It’s currently challenging perceived real estate “flips” through the court system, with mixed results, depending on the facts of the case.
The taxpayer was reassessed by the CRA for her 2011, 2015 and 2016 taxation years in connection with the sale of four properties she owned at various times during that period. But it was the 2011 sale of her Toronto property that was most contentious, because the CRA assessed the taxpayer beyond the normal three-year reassessment period and imposed a gross negligence penalty for that year.