brockm
Active Member
The Bay Area is not *actually* more expensive than Toronto. There's certainly some areas that will give Rosedale and Yorkville a run for its money. But generally speaking, it's actually much cheaper to live there.
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Baby, we got a bubble!?
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The Bay Area is not *actually* more expensive than Toronto. There's certainly some areas that will give Rosedale and Yorkville a run for its money. But generally speaking, it's actually much cheaper to live there.
urbandreamer
recession proof
Let's pop this bubble you're in and talk about the #condoBBL Condo Bubble.
James
Senior Member
Not specific to Toronto but here's a fun rundown of some of the assessments of the Canadian housing market (from Canadian Business):
http://www.canadianbusiness.com/economy/trailing-indicator-2/
Infographic: Just how overvalued are Canadian homes? It depends who you ask
Apr 4, 2013 Matthew McClearn
The long-anticipated slowdown in Canadian residential real estate is now underway, and guessing how far national home prices might fall has become a popular pastime—scarcely a month goes by without a new estimate making headlines. The astute observer may discern some correlation between the tone of the prediction and the economic interests of its promoter. After all, it seems like the sunniest forecasts come from realtors and banks who are active in mortgage lending; leave it to the depraved journalists—particularly those pessimistic foreign ones—to envisage a fiery apocalypse in our future.
http://www.canadianbusiness.com/economy/trailing-indicator-2/
Infographic: Just how overvalued are Canadian homes? It depends who you ask
Apr 4, 2013 Matthew McClearn
The long-anticipated slowdown in Canadian residential real estate is now underway, and guessing how far national home prices might fall has become a popular pastime—scarcely a month goes by without a new estimate making headlines. The astute observer may discern some correlation between the tone of the prediction and the economic interests of its promoter. After all, it seems like the sunniest forecasts come from realtors and banks who are active in mortgage lending; leave it to the depraved journalists—particularly those pessimistic foreign ones—to envisage a fiery apocalypse in our future.
CN Tower
Banned
Hear hear! Enough dreary off topic self-indulgent whining.
Back to the housing market, UD, I hear rumors that your much admired 155 Redpath sold but 5 units in its debut. Can you confirm or deny this info?
mig174
Active Member
Sounds like someone needs a hug.
Let me ask you this. Suppose five people are on a hiking trip, and one person is much physically stronger (due to working out at the gym, eating healthy) and therefore carries a higher share of the backpacks, etc. Shouldn't you be saying to that person "Hey man, thanks, glad to have you with us", instead of, "F**K you, you're lucky to be able to hang out with us. Shut your pie-hole or we'll make you carry more!". Just a thought.
How about... your analogy fails to capture the substance of the argument? Our society didn't magically appear out of nowhere and can't be reduced to hikers, one of whom put a little bit more time in the gym, sorry.
brockm said:
Wanting people to pay their fair share is not punishment. You viewing that as punishment demonstrates that yes, you actually do feel unfairly treated.
...yeah, except that's nowhere near remotely true. As someone in the healthcare industry, I can tell you that you are way off on your numbers (and as interested said).
It's not about sticking it to anyone. There you go again with feeling victimized. It's simply about paying a fair share, which is not too hard. Taxation as it is right now in Canada is not an impediment to a good lifestyle for people in your tax bracket. And if it is, you're not managing your money properly. There really is no point in whining.
This is a fair argument and something that is important for Canadian politicians and economists to consider. However, as to whether the taxes are too high for you to bear, that's rather different.
anyways, done derailing thread. apologies.
Kenny
Active Member
Our taxes on capital gains are lower, too.
James
Senior Member
I'm doing my best to keep this thread on-topic. 
In condo news, just wanted to share an article from Bloomberg News outlining pretty much what many of us were anticipating.
http://www.bloomberg.com/news/2013-04-10/toronto-condo-kings-retreating-to-avert-crash-mortages.html
Toronto Condo Kings Retreating to Avert Crash: Mortgages
By Katia Dmitrieva - Apr 10, 2013
Toronto condo builders are slowing development in a bid to avoid a crash after a decade-long boom led to 159 towers now under construction.
So far this year, they’ve announced 13 new condominium projects, the fewest since the recession in 2009, when there were just three over the same period, figures from real estate researcher RealNet Canada Inc. show. In the same period last year, 29 new projects were announced, including Tridel Corp.’s Ten York, the third-tallest residential tower in the country at 75-stories when it was first marketed.
“Most developers have their hands in their pockets right now,” said Brad Lamb, president of Brad J. Lamb Realty Inc., a developer and the city’s largest condominium broker. His firm, which is marketing more than 45 high-rise developments in the city, won’t start a new project until 2014, Lamb said in an interview at Bloomberg’s office in Toronto. Lamb said he has eight projects in Toronto and Ottawa “on the drawing board.”
The slowdown comes as a near-record supply of condos comes to market in a city with the most towers being constructed in the world, according to BuzzBuzzHome, a Toronto-based real estate listings and research firm. Developers are trying to manage the slowdown as buyers retreat amid tighter mortgage rules, a slowing economy and the burden of record consumer debt.
The supply of new high-rise units reached 21,262 in February, 34 percent more than the same period a year ago and close to a record 21,696 in October 2012, RealNet figures show. About 61,000 units are currently under construction -- the most ever -- and a record 35,757 residential units will come on stream next year, RealNet said.
Canceled Lumen
Developer Concord Adex postponed its previously announced Lumen this year, a 30-story building in a cluster of condos near the Gardiner Expressway, a major highway that connects the western suburbs with the city, according to BuzzBuzzHome.
Menkes Development Ltd was one of the first to announce this year, putting its 29-story 365 Church development on sale for purchase in March. Due for completion in 2017, unit size starts at 323 square feet (30 square-meters), among the smallest in the city.
“Condo prices are not going up now the way they have been,” said Finn Poschmann, vice president of research at the C.D. Howe Institute in Toronto. “From the developers’ side, they’re saying ’OK. Enough is enough right now. We’re digesting a shift in the market as it is and we really don’t need to be beat up more.’”
Sales Dropping
Sales of high-rise homes in the city have dropped 34 percent since 2011, after rising 64 percent in the past decade until 2012. Prices have declined 5.5 percent over the past two years, according to RealNet.
Sales are weakening after the government tightened mortgage rules to curb record household debt and orchestrate a so-called “soft landing” in the housing market. Benchmark interest rates held at 1 percent since 2009 in the longest pause since the 1950s stoked a housing boom. The government has been trying to rein it in, shortening amortizations in June to 25 years from 30 years, the fourth time in four years it tightened home loan regulations. The Office of the Superintendent of Financial Institutions also introduced tougher standards for lenders.
The government has also pressured banks not to cut home loan lending rates below 3 percent, with Finance Minister Jim Flaherty saying on March 19 that “we don’t want a race to the bottom on mortgage rates.” Manulife Financial Corp. (MFC) withdrew a promotional 2.89 percent five-year fixed mortgage rate after the finance department called the bank to express the minister’s “displeasure.”
Mortgage Wars
Bank of Nova Scotia (BNS) Chief Executive Officer Richard Waugh said that Flaherty shouldn’t interfere with mortgage pricing, the latest in the so-called “mortage wars.”
“I understand why the finance minister is concerned about the Canadian economy, but I just philosophically don’t think” government should be setting product pricing, Waugh said yesterday in an interview in Halifax, Nova Scotia, where the bank held its annual shareholders meeting. Canada will have a “soft landing” in the housing market and not a full-scale crash, Waugh said.
The effect of the government’s focus on rates and borrowing was that many first-time home buyers were priced out of the market and grew cautious as Mark Carney, the Bank of Canada governor, emphasized the risk to an over-heated housing market, Poschmann said.
Soft Landings
“Everyone knows that soft landings are difficult to negotiate,” Poschmann said. “So you use multiple tools, you push on multiple buttons, and that’s what the government has done.”
Investors are beginning to hear about the high amount of supply and are backing off, Will Dunning, president of real estate market analysis firm Will Dunning Inc., said in a phone interview from Toronto. The government’s mortgage tightening has taken at least a quarter of condominium buyers off the market, he said.
“Low interest rates made condos a very attractive investment, I wouldn’t say a bubble but I would say too much activity,” he said. “There are multiple outcomes, including the investor saying ‘It’s time to get out of this market’ and if a lot of them say that at the same time, then you see prices fall.”
Available Properties
Sales of single-family homes in the city are continuing to rise due to the lack of available properties and space constraints on building. Homes are at a record premium of C$204,000 ($200,866) to their high-rise counterparts, according to RealNet data. Since 2009, condo prices have risen steadily 25 percent, compared to a 45 percent spike for low-rises over the same period.
Still the Toronto Real Estate Board, or TREB, forecasts the slowest overall growth since 2008 this year, with average home prices of C$515,000 in 2013, a 3.6 percent advance over 2012. The board forecasts 80,000 total housing sales this year, a 6.5 percent decline from last year and what would be the steepest decline since 2008.
“It’s a tale of two markets when it comes to price growth,” said Jason Mercer, head economist at TREB. “On the low-rise side of the market it’s been extremely tight. There’s a lot of competition out there and lots of inventory. On the condo side, you’ve got quite a bit of supply.”
The boom in some ways has helped regulate the supply coming to market, Lamb said. Developers are all simultaneously building a record number of units, which means there isn’t enough construction equipment such as cranes, or enough workers to go around, delaying sales, construction, and occupancy. Developers saw this coming more than a year ago, Lamb said.
Housing Bubble
That may not be enough to engineer a soft-landing.
“We had a housing bubble in 1989 that burst, so there’s an example of where the government policy did not create a soft landing,” Craig Alexander, senior economist at Toronto-Dominion Bank (TD), said in a phone interview from Toronto. “Real estate has generally been more volatile than the overall economy and it’s tended to underperform during recessions and then rebound early in the economic recovery.”
Demand for space to develop downtown remains strong. Residential land transactions hit a record C$2.75 billion dollars last year, encompassing all transactions for residential property, land to build residential properties, and for mixed- use purposes, according to RealNet.
Housing starts have also begun to rise again after reaching the lowest level in almost two years in January. They rose for a second month in February to a 184,028 annual rate.
Creeping Higher
“On lower volume, the housing price is still creeping higher -- in the equity market that doesn’t last, it’s a divergence,” said Jeffrey Burchell, fund manager at Aston Hill (AHF) Financial Inc., which manages C$6.7 billion in North America. “You run for the hills when you see that.”
Aston Hill owns shares of InterRent (IIP-U) Real Estate Investment Trust, an Ottawa-based residential multiresidence manager that owns about 4,700 units in Ontario.
“If you see the market going up on low volume, you just sell everything and walk away for a while,” Burchell said. “It’s bizarre that housing prices are still going up but volume’s down because all it does is it takes less to tip it all over.”
To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
In condo news, just wanted to share an article from Bloomberg News outlining pretty much what many of us were anticipating.
http://www.bloomberg.com/news/2013-04-10/toronto-condo-kings-retreating-to-avert-crash-mortages.html
Toronto Condo Kings Retreating to Avert Crash: Mortgages
By Katia Dmitrieva - Apr 10, 2013
Toronto condo builders are slowing development in a bid to avoid a crash after a decade-long boom led to 159 towers now under construction.
So far this year, they’ve announced 13 new condominium projects, the fewest since the recession in 2009, when there were just three over the same period, figures from real estate researcher RealNet Canada Inc. show. In the same period last year, 29 new projects were announced, including Tridel Corp.’s Ten York, the third-tallest residential tower in the country at 75-stories when it was first marketed.
“Most developers have their hands in their pockets right now,” said Brad Lamb, president of Brad J. Lamb Realty Inc., a developer and the city’s largest condominium broker. His firm, which is marketing more than 45 high-rise developments in the city, won’t start a new project until 2014, Lamb said in an interview at Bloomberg’s office in Toronto. Lamb said he has eight projects in Toronto and Ottawa “on the drawing board.”
The slowdown comes as a near-record supply of condos comes to market in a city with the most towers being constructed in the world, according to BuzzBuzzHome, a Toronto-based real estate listings and research firm. Developers are trying to manage the slowdown as buyers retreat amid tighter mortgage rules, a slowing economy and the burden of record consumer debt.
The supply of new high-rise units reached 21,262 in February, 34 percent more than the same period a year ago and close to a record 21,696 in October 2012, RealNet figures show. About 61,000 units are currently under construction -- the most ever -- and a record 35,757 residential units will come on stream next year, RealNet said.
Canceled Lumen
Developer Concord Adex postponed its previously announced Lumen this year, a 30-story building in a cluster of condos near the Gardiner Expressway, a major highway that connects the western suburbs with the city, according to BuzzBuzzHome.
Menkes Development Ltd was one of the first to announce this year, putting its 29-story 365 Church development on sale for purchase in March. Due for completion in 2017, unit size starts at 323 square feet (30 square-meters), among the smallest in the city.
“Condo prices are not going up now the way they have been,” said Finn Poschmann, vice president of research at the C.D. Howe Institute in Toronto. “From the developers’ side, they’re saying ’OK. Enough is enough right now. We’re digesting a shift in the market as it is and we really don’t need to be beat up more.’”
Sales Dropping
Sales of high-rise homes in the city have dropped 34 percent since 2011, after rising 64 percent in the past decade until 2012. Prices have declined 5.5 percent over the past two years, according to RealNet.
Sales are weakening after the government tightened mortgage rules to curb record household debt and orchestrate a so-called “soft landing” in the housing market. Benchmark interest rates held at 1 percent since 2009 in the longest pause since the 1950s stoked a housing boom. The government has been trying to rein it in, shortening amortizations in June to 25 years from 30 years, the fourth time in four years it tightened home loan regulations. The Office of the Superintendent of Financial Institutions also introduced tougher standards for lenders.
The government has also pressured banks not to cut home loan lending rates below 3 percent, with Finance Minister Jim Flaherty saying on March 19 that “we don’t want a race to the bottom on mortgage rates.” Manulife Financial Corp. (MFC) withdrew a promotional 2.89 percent five-year fixed mortgage rate after the finance department called the bank to express the minister’s “displeasure.”
Mortgage Wars
Bank of Nova Scotia (BNS) Chief Executive Officer Richard Waugh said that Flaherty shouldn’t interfere with mortgage pricing, the latest in the so-called “mortage wars.”
“I understand why the finance minister is concerned about the Canadian economy, but I just philosophically don’t think” government should be setting product pricing, Waugh said yesterday in an interview in Halifax, Nova Scotia, where the bank held its annual shareholders meeting. Canada will have a “soft landing” in the housing market and not a full-scale crash, Waugh said.
The effect of the government’s focus on rates and borrowing was that many first-time home buyers were priced out of the market and grew cautious as Mark Carney, the Bank of Canada governor, emphasized the risk to an over-heated housing market, Poschmann said.
Soft Landings
“Everyone knows that soft landings are difficult to negotiate,” Poschmann said. “So you use multiple tools, you push on multiple buttons, and that’s what the government has done.”
Investors are beginning to hear about the high amount of supply and are backing off, Will Dunning, president of real estate market analysis firm Will Dunning Inc., said in a phone interview from Toronto. The government’s mortgage tightening has taken at least a quarter of condominium buyers off the market, he said.
“Low interest rates made condos a very attractive investment, I wouldn’t say a bubble but I would say too much activity,” he said. “There are multiple outcomes, including the investor saying ‘It’s time to get out of this market’ and if a lot of them say that at the same time, then you see prices fall.”
Available Properties
Sales of single-family homes in the city are continuing to rise due to the lack of available properties and space constraints on building. Homes are at a record premium of C$204,000 ($200,866) to their high-rise counterparts, according to RealNet data. Since 2009, condo prices have risen steadily 25 percent, compared to a 45 percent spike for low-rises over the same period.
Still the Toronto Real Estate Board, or TREB, forecasts the slowest overall growth since 2008 this year, with average home prices of C$515,000 in 2013, a 3.6 percent advance over 2012. The board forecasts 80,000 total housing sales this year, a 6.5 percent decline from last year and what would be the steepest decline since 2008.
“It’s a tale of two markets when it comes to price growth,” said Jason Mercer, head economist at TREB. “On the low-rise side of the market it’s been extremely tight. There’s a lot of competition out there and lots of inventory. On the condo side, you’ve got quite a bit of supply.”
The boom in some ways has helped regulate the supply coming to market, Lamb said. Developers are all simultaneously building a record number of units, which means there isn’t enough construction equipment such as cranes, or enough workers to go around, delaying sales, construction, and occupancy. Developers saw this coming more than a year ago, Lamb said.
Housing Bubble
That may not be enough to engineer a soft-landing.
“We had a housing bubble in 1989 that burst, so there’s an example of where the government policy did not create a soft landing,” Craig Alexander, senior economist at Toronto-Dominion Bank (TD), said in a phone interview from Toronto. “Real estate has generally been more volatile than the overall economy and it’s tended to underperform during recessions and then rebound early in the economic recovery.”
Demand for space to develop downtown remains strong. Residential land transactions hit a record C$2.75 billion dollars last year, encompassing all transactions for residential property, land to build residential properties, and for mixed- use purposes, according to RealNet.
Housing starts have also begun to rise again after reaching the lowest level in almost two years in January. They rose for a second month in February to a 184,028 annual rate.
Creeping Higher
“On lower volume, the housing price is still creeping higher -- in the equity market that doesn’t last, it’s a divergence,” said Jeffrey Burchell, fund manager at Aston Hill (AHF) Financial Inc., which manages C$6.7 billion in North America. “You run for the hills when you see that.”
Aston Hill owns shares of InterRent (IIP-U) Real Estate Investment Trust, an Ottawa-based residential multiresidence manager that owns about 4,700 units in Ontario.
“If you see the market going up on low volume, you just sell everything and walk away for a while,” Burchell said. “It’s bizarre that housing prices are still going up but volume’s down because all it does is it takes less to tip it all over.”
To contact the reporter on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
Hank
Active Member
I don't believe that that is correct. US long-term capital gains rates are 15%, while in Canada (taking Ontario as an example) it's about 23%. All that being said, I dont believe that VC profits would be taxable as capital gains, at least not in Canada. Same reason day-traders don't pay capital gains rates on their profits.
urbandreamer
recession proof
Does anyone else see a potential cartoon or comedy in that article?
I'll see what I can come up with
I'll see what I can come up with
mettle
Active Member
i don't want to continue the tangent, but there was an article that some might find interesting.
http://www.theglobeandmail.com/glob...xes-is-the-right-thing-to-do/article11085968/
i don't think any system or level of taxation would ever be considered fair or proper by everybody, not even close.
http://www.theglobeandmail.com/glob...xes-is-the-right-thing-to-do/article11085968/
i don't think any system or level of taxation would ever be considered fair or proper by everybody, not even close.
Kenny
Active Member
I'm no tax expert, so I could be wrong, but...
http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States
http://en.wikipedia.org/wiki/Capital_gains_tax#Canada
That 50% thing makes a pretty big difference, no?
Hank
Active Member
The quote you took from the wikipedia article deals with US short-term capital gains rates (i.e. for property held less than one year); US long-term capital gains rates (on property held for longer than one year, which is what you do if you're looking to earn capital gains income) were 15% for the past number of years, but apparently went up in 2013 to 20% (I actually wasn't aware of that). Even at 20%, though, that's still likely less than the rates many people with significant capital gains would pay in Canada (since such people tend to be in the highest tax bracket already, which for Ontario (ignoring the new high-income surtax) is 46.4%, meaning that capital gains are taxed at 23.2% since, as you note, they are taxed at 50% of your regular rate).
Anyway, enough of a tangent, I suppose.
urbandreamer
recession proof
I heard sales have been slow.
marsh
Active Member
Some Toronto condo sales face CRA scrutiny
The Canada Revenue Agency is taking hard look at people selling condos for big profit after long boom.
DAVID COOPER / TORONTO STAR
The Canada Revenue Agency taking hard look at people selling condos for a big profit after long boom.
By: James Daw Special to the Star, Published on Sat Apr 13 2013
Explore This Story
Some sellers of new Toronto condos are seeing years of price gains in a booming market taxed away. Canada Revenue Agency auditors have added penalties to taxes for those who claimed their condo as a home, but soon changed their minds and sold.
The CRA has yet to disclose how many sellers have been affected. But Toronto tax lawyer and text author David Sherman and other tax experts, accuse auditors of unfairly ignoring some legitimate explanations for sales. Meanwhile, Finance Minister Jim Flaherty wants the CRA to collect more than $500 million extra from suspected tax cheats this year.
“The auditors have applied a rare 50 per cent penalty for ‘gross negligence,’ even on those who had never owned a condo previously,” says Sherman.
Sam Papadopoulos, a CRA spokesman, said the agency chooses areas to audit based on “current and emerging risks to the tax base.” The CRA is looking at real estate because of the recent condo boom “for which we have discovered non-reporting of taxable income – builder GST/HST housing rebates and capital gains/income in sales of real property.”
He added that auditors look at such things as the seller’s intention, the type of property they sold, the frequency of purchase and sales, why they sold and how the purchase and sales fit with the person’s ordinary business. He said auditors do not receive bonuses to encourage them to perform more audits.
Canada has three tiers of tax treatment for real estate sales — no tax on a principal residence, tax on half a gain from selling a recreational, rental or other investment property, and full taxation for making a business of buying and selling — known colloquially as flipping.
Also read: Selling a condo? Beware the taxman
Lawyer James Rhodes of TaxationLawyers in Kitchener says some auditors are alleging sellers are making quick flips if the time between the registration of a condo and its sale is short. This is even though they may have bought the condo years previously, before construction started.
“If someone signed a purchase agreement 10 years ago to buy a condo, but then sold it the day after the condo was finally registered, the CRA would say that person sold the condo as a quick flip because they only owned it one day,” he says.
“The CRA doesn’t seem to care that a person’s circumstances might have changed over the ten years, such that they don’t want to live in the condo anymore.”
One of Rhodes’ clients was single when he bought a condo in downtown Toronto in 2005. By 2009 he was engaged, and his fiancée wanted to be closer to her work in Guelph. So, he sold it, soon after it was registered.
An auditor decided that the sale so soon after registration was suspicious, and so was the original choice of a two-bedroom apartment: “There is no reason to purchase a two bedroom condominium for one person,” he claimed.
Rhodes says his client was assessed with over $100,000 of business income, resulting in a tax bill of roughly $50,000. He also faced a $25,000 penalty.
“I estimate the cost to take this to the Tax Court (of Canada) will be around $10,000 to $15,000.”
A married chartered accountant waited five years for a new 935-square-foot condo unit to be built at Bloor and Jarvis Streets. But she decided after living there 15 days in 2011 it was simply too cramped.
“We would have had to turn the entire second bedroom into a closet,” she explained. “My husband would have had to watch television in the living room.”
They changed their plans, kept their old family home, but claimed the condo as a principal residence for the time they owned it. (It is permissible to claim different homes as one’s principal residence, just not two at the same time.)
A CRA auditor has ordered her to pay $72,000 of tax, and a $36,000 penalty, on a $150,000 price gain. She had already looked into CRA practices and wrote March 18 to ask Minister of National Revenue, Gail Shea, to order an investigation
The Canada Revenue Agency is taking hard look at people selling condos for big profit after long boom.
DAVID COOPER / TORONTO STAR
The Canada Revenue Agency taking hard look at people selling condos for a big profit after long boom.
By: James Daw Special to the Star, Published on Sat Apr 13 2013
Explore This Story
Some sellers of new Toronto condos are seeing years of price gains in a booming market taxed away. Canada Revenue Agency auditors have added penalties to taxes for those who claimed their condo as a home, but soon changed their minds and sold.
The CRA has yet to disclose how many sellers have been affected. But Toronto tax lawyer and text author David Sherman and other tax experts, accuse auditors of unfairly ignoring some legitimate explanations for sales. Meanwhile, Finance Minister Jim Flaherty wants the CRA to collect more than $500 million extra from suspected tax cheats this year.
“The auditors have applied a rare 50 per cent penalty for ‘gross negligence,’ even on those who had never owned a condo previously,” says Sherman.
Sam Papadopoulos, a CRA spokesman, said the agency chooses areas to audit based on “current and emerging risks to the tax base.” The CRA is looking at real estate because of the recent condo boom “for which we have discovered non-reporting of taxable income – builder GST/HST housing rebates and capital gains/income in sales of real property.”
He added that auditors look at such things as the seller’s intention, the type of property they sold, the frequency of purchase and sales, why they sold and how the purchase and sales fit with the person’s ordinary business. He said auditors do not receive bonuses to encourage them to perform more audits.
Canada has three tiers of tax treatment for real estate sales — no tax on a principal residence, tax on half a gain from selling a recreational, rental or other investment property, and full taxation for making a business of buying and selling — known colloquially as flipping.
Also read: Selling a condo? Beware the taxman
Lawyer James Rhodes of TaxationLawyers in Kitchener says some auditors are alleging sellers are making quick flips if the time between the registration of a condo and its sale is short. This is even though they may have bought the condo years previously, before construction started.
“If someone signed a purchase agreement 10 years ago to buy a condo, but then sold it the day after the condo was finally registered, the CRA would say that person sold the condo as a quick flip because they only owned it one day,” he says.
“The CRA doesn’t seem to care that a person’s circumstances might have changed over the ten years, such that they don’t want to live in the condo anymore.”
One of Rhodes’ clients was single when he bought a condo in downtown Toronto in 2005. By 2009 he was engaged, and his fiancée wanted to be closer to her work in Guelph. So, he sold it, soon after it was registered.
An auditor decided that the sale so soon after registration was suspicious, and so was the original choice of a two-bedroom apartment: “There is no reason to purchase a two bedroom condominium for one person,” he claimed.
Rhodes says his client was assessed with over $100,000 of business income, resulting in a tax bill of roughly $50,000. He also faced a $25,000 penalty.
“I estimate the cost to take this to the Tax Court (of Canada) will be around $10,000 to $15,000.”
A married chartered accountant waited five years for a new 935-square-foot condo unit to be built at Bloor and Jarvis Streets. But she decided after living there 15 days in 2011 it was simply too cramped.
“We would have had to turn the entire second bedroom into a closet,” she explained. “My husband would have had to watch television in the living room.”
They changed their plans, kept their old family home, but claimed the condo as a principal residence for the time they owned it. (It is permissible to claim different homes as one’s principal residence, just not two at the same time.)
A CRA auditor has ordered her to pay $72,000 of tax, and a $36,000 penalty, on a $150,000 price gain. She had already looked into CRA practices and wrote March 18 to ask Minister of National Revenue, Gail Shea, to order an investigation
Riverdale Rink Rat
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That's awesome. A CA tries to claim, WITHOUT SELLING HER OTHER HOME, that her principal residence changed for two weeks and therefore she should not have to pay taxes on the capital gain. And then complains about it to the minister and the Star! Talk about chutzpah -- I'm truly in awe!