Baby, we got a bubble!?

[James]

^ Agreed. I simply can't fathom how she could justify not paying capital gains tax on a 2nd property because she "lived in it" for 2 weeks. It's a 2nd property, period. You sell it, you pay capital gains.

 

[detroitbootybass]

“My husband would have had to watch television in the living room.â€

What an outrage.

 

[Hank]

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!

Other than the fact that there's a question as to whether she "ordinarily inhabited" the condo if she only lived there for 15 days, there's absolutely nothing wrong with what she did. There's no limit on the number of "principal residences" you can own at a time, as long as you "ordinarily inhabit" all of them (although you can only claim one in any given year for the purposes of the exemption). For example if you own a cottage that you regularly go to each year but only for two weeks, that still counts as "ordinarily inhabiting".

 

[Hank]

What an outrage.

Heh...yeah I thought that was funny too. That poor man.

 

[adeel]

Other than the fact that there's a question as to whether she "ordinarily inhabited" the condo if she only lived there for 15 days, there's absolutely nothing wrong with what she did. There's no limit on the number of "principal residences" you can own at a time, as long as you "ordinarily inhabit" all of them (although you can only claim one in any given year for the purposes of the exemption). For example if you own a cottage that you regularly go to each year but only for two weeks, that still counts as "ordinarily inhabiting".

there is a limit on principal residence designation - only one property in a given year can be designated as such - but there is no requirement for number of days - cottage example being a very good one to explain the concept

 

[Kenny]

Other than the fact that there's a question as to whether she "ordinarily inhabited" the condo if she only lived there for 15 days, there's absolutely nothing wrong with what she did. There's no limit on the number of "principal residences" you can own at a time, as long as you "ordinarily inhabit" all of them (although you can only claim one in any given year for the purposes of the exemption). For example if you own a cottage that you regularly go to each year but only for two weeks, that still counts as "ordinarily inhabiting".

+1.

A property qualifies as your principal residence for any year if it meets all of the following four conditions:

It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation.
You own the property alone or jointly with another person.
You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year.
You designate the property as your principal residence.

Principal residence

If you sell your home for more than what it cost you, you usually do not have to report the sale on your income tax and benefit return or pay tax on any gain as long as:

your home is your principal residence; and
you or a member of your family did not designate any other property as a principal residence while you owned your home. For more information, see Principal residence.

http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4037-e.html#P4266_152355

However, if she claims it as a primary residence, then the period from the purchase of the condo to the sale cannot be claimed as primary for her other home. e.g. if she bought in 2005 and sold in 2009, and her other home was purchased in 2000 and sold in 2010, then you have to pay taxes on four years of that. I think...?

 

[Riverdale Rink Rat]

Y'all are out to lunch. You're misquoting the CRA and trying to do the same weasel she's claiming.

From the link above:
"For 1982 and later years, you can only designate one home as your family's principal residence for each year."

and:

"When you sell your home or when you are considered to have sold it, usually you do not have to report the sale on your income tax and benefit return and you do not have to pay tax on any gain from the sale. This is the case if the home was your principal residence for every year you owned it.

If your home was not your principal residence for every year that you owned it, you have to report the part of the capital gain on the property that relates to the years for which you did not designate the property as your principal residence."

Hank's 'ordinarily inhabiting' line is not true, and hasn't been since 1982. Furthermore, our CA in question is trying to have her cake and eat it, too -- the deposit she put down was five years before, and there's no way she could live in it until it was finished. So, she's trying to claim five years of gains rather than changing her primary residence as of the day she moved in (i.e. the price two weeks beforehand) which would not be to her advantage. I don't know what happens with a condo that you buy pre-construction and then live in for ten years, but it's pretty much a foregone conclusion that this was a tax dodge.

 

[Hank]

Y'all are out to lunch. You're misquoting the CRA and trying to do the same weasel she's claiming.

From the link above:
"For 1982 and later years, you can only designate one home as your family's principal residence for each year."

and:

"When you sell your home or when you are considered to have sold it, usually you do not have to report the sale on your income tax and benefit return and you do not have to pay tax on any gain from the sale. This is the case if the home was your principal residence for every year you owned it.

If your home was not your principal residence for every year that you owned it, you have to report the part of the capital gain on the property that relates to the years for which you did not designate the property as your principal residence."

Hank's 'ordinarily inhabiting' line is not true, and hasn't been since 1982. Furthermore, our CA in question is trying to have her cake and eat it, too -- the deposit she put down was five years before, and there's no way she could live in it until it was finished. So, she's trying to claim five years of gains rather than changing her primary residence as of the day she moved in (i.e. the price two weeks beforehand) which would not be to her advantage. I don't know what happens with a condo that you buy pre-construction and then live in for ten years, but it's pretty much a foregone conclusion that this was a tax dodge.

Not trying to be condescending, but you're confusing a number of issues. The 1982 date relates to the ability of a family to claim multiple principal residence exemptions for different properties in the same year; it has nothing to do with the requirement that you have to "ordinarily inhabit" a residence for it to be your principal residence (as per s.54 of the income tax act), which always has been, and continues to be, the case. Note that I said "claim" multiple principal residence exemptions in the same year; while this is no longer allowed, you can still certainly own multiple residences, each of which has the potential to be claimed as a principal residence in any given year.

That's why there's no problem with someone owning a house, buying a condo, "ordinarily inhabiting" both of them for five years (if you spent most of the time at the house but a few weeks each year in the condo, for example), then selling the condo and claiming your principal residence exemption to shelter all of the gain arising on the sale of the condo. That's perfectly fine. What you can't do, however, is then turn around, sell your house, and claim the principal residence exemption to shelter the portion of the gain relating to the five-year period in which you'd already "used up" your principal residence exemption on the condo (I'm ignoring the +1 year rule for the sake of simplicity).

With a pre-con condo, you don't actually purchase the condo when you put down your deposit; you purchase it when it's finished and you actually close the sale. If I put down a deposit in 2008, the condo is ready in 2013 and I purchase it (for the price agreed on back in 2008) and start "ordinarily inhabiting" it in 2013, I can then sell it in 2013 and shelter the entire gain realized on the sale. Again, that's perfectly fine (but again, I can't later designate any other residence as my principal residence in 2013 for the purposes of claiming the exemption). Now, as I originally mentioned, the question in this case would be whether I actually ordinarily inhabited it in 2013 or whether I just pretended to do so and in fact always intended to flip it for a profit; this comes down to a question of intention and actions and is often a difficult distinction to draw.

 

[realist123]

Can a mod move all these tax posts to a new thread? It is frustrating that this thread has gone so off topic.

 

[daveto]

While it may be that the CRA code hasn't clearly defined the treatment for pre-construction RE, it seems pretty obvious what was intended

If it is NOT RE, then one presumes that any gain between the deposit and the close would be an investment gain and should be fully taxable for all buyers.
If it IS RE, then the capital gain is earned during the period between the deposit and the eventual sale, even if the sale happens the day after the close.

In this case, the accountant lady took the position that there was ZERO capital gain in the 5 years between the deposit and the close (when it wasn't her primary residence), and then there was $150k gain in the two weeks between the close and the sale (during which time she had conveniently elected it as her primary residence).

Seems to me like the CRA got this one correct.

ps, And now, to satisfy Realist123, let me say that you RE Bulls are delusional and destroying the country with your narcissistic RE hubris, while my and my flock of bears are the chosen people, destined to rise up to heaven while the RE Bulls suffer the torments of the doomed. Consider and discuss.

 

[Riverdale Rink Rat]

Now, as I originally mentioned, the question in this case would be whether I actually ordinarily inhabited it in 2013 or whether I just pretended to do so and in fact always intended to flip it for a profit; this comes down to a question of intention and actions and is often a difficult distinction to draw.

Hank: I'm assuming you're also a tax accountant bogged down in the esoterica of the statute, much like our CA who did the flip. If she had sold her other house to move to the condo, you could make a case that she wasn't flipping the condo. But that's not what she did. She lived in another principal residence for the entire time the condo was under construction, moved into the condo for much, much less than a year (do you think she moved the matrimonial bed? Or the paintings? Or did she just take the TV and her camping gear?), sold the condo and moved back to her principal residence of her entire (recent) life. C'mon -- you're smarter than that. It ain't 'difficult' to figure out the 'question of intention and actions', even if you wish the lady hadn't been caught, so you'd be able to use that dodge yourself.

 

[Riverdale Rink Rat]

ROB follow up on new renters

http://www.theglobeandmail.com/glob...ar-later-and-still-loving-it/article11360326/

Vancouverite who sold her house last summer and started to rent. It sounds like she's happy with her decision.

 

[marsh]

Canada’s housing market drawing the big-money crowd
Sotheby’s finds more foreign buyers looking to Canada as a safe and stable place to live

The Toronto Star
According to Sotheby's, foreign interest in high-dollar homes like this one is increasing.
By: Susan Pigg Business Reporter, Published on Wed Apr 17 2013
Republish
Sotheby’s International Realty is seeing a surge in demand from wealthy Syrians, Egyptians and Europeans looking for a safe and relatively stable place to park their millions — Canada’s softening real estate market.
There has been an uptick in “very significant transactions” in tony areas like Oakville and North Toronto by Europeans, many with young families who originally had planned to settle in the U.S. but fell in love with Canada instead, says Sotheby’s Canada CEO Ross McCredie.
At the same time, Montreal’s exclusive Westmount area has become top of the real estate wish list for high-net worth Syrians and Egyptians looking for a safe haven for their money and families, he added.
Increasingly, many of these deals — especially those over $10 millionthose over $10 million — aren’t even showing up in MLS sales tallies because of buyers seeking the privacy afforded by private or exclusive deals, or finalized under the cloak of a corporate purchase, McCredie noted.
“The lack of inventory is a big problem in the high-end market,” so agents are having to find their own properties rather than look to the MLS system, said Andy Taylor of Sotheby’s Toronto office, which has done more international business in the last 18 months than in the last six years.
“What we are seeing is very wealthy high-net worth individuals who see the Canadian real estate market as undervalued in their world, in terms of what else they are looking at and what else they own,” added McCredie.
“They see this as a stable country. They love our currency. And they see cities that have changed dramatically in the last 20 years and are much more appealing to an international buyer.”
In a bid to better understand who is buying, why and where, the high-end realty company — which just launched into the Canadian market eight years ago — undertook a survey of its top agents in over a dozen key cities and produced what it calls its first Top Tier Trends Report.
While there has been a softening in demand for homes over $2 million, especially in Vancouver and Toronto, since housing sales began their double-digit slump last summer, Canada remains firmly fixed on the radar for the growing number of millionaires and billionaires from Shanghai to Sydney, notes the report released Thursday.
Wealthy Canadians, of course, remain the dominant players in this niche market, but in Toronto, Vancouver and Montreal they’ve been facing more competition, particularly in the last five years, from would-be Chinese, Russian, British and American buyers, it says.
Sotheby’s has seen heightened interest from Europeans, largely in Toronto real estate, since the euro crisis, says McCredie, adding that about 25 per cent of its luxury sales in the Toronto area are to foreigners from the U.S., China, Russia, the Middle East and India.
Its percentage of foreign buyers is closer to 40 per cent in Vancouver and 50 per cent in Montreal, notes the report, according to Sotheby’s agents surveyed for the study.
Most are looking for iconic, spacious homes with very high-end finishes, but others are willing to pay what it takes just to get a great location — even if it means pumping millions more into the place in renovations, said McCredie.
Just six weeks ago, Sotheby’s recorded a record $4 million sale — the highest price ever paid for a semi-detached house in Toronto.
The 4,000-square-foot semi is in Yorkville. The buyer was local, but 30 per cent of those looking at the well-appointed home were international buyers, said Taylor.

 

[Hank]

Hank: I'm assuming you're also a tax accountant bogged down in the esoterica of the statute, much like our CA who did the flip. If she had sold her other house to move to the condo, you could make a case that she wasn't flipping the condo. But that's not what she did. She lived in another principal residence for the entire time the condo was under construction, moved into the condo for much, much less than a year (do you think she moved the matrimonial bed? Or the paintings? Or did she just take the TV and her camping gear?), sold the condo and moved back to her principal residence of her entire (recent) life. C'mon -- you're smarter than that. It ain't 'difficult' to figure out the 'question of intention and actions', even if you wish the lady hadn't been caught, so you'd be able to use that dodge yourself.

I'm a tax lawyer. I don't want to bog this thread down any further but, as I said from the start, the question is whether she "ordinarily inhabited" the condo while she owned it, or whether she always intended to sell it for a profit. My point is simply that you can "ordinarily inhabit" a property for a short length of time while you're also ordinarily inhabiting another property, then sell the first property and claim your principal residence exemption to shelter any gain. Whether she did in this case is something for the CRA (or the courts, potentially) to decide on the facts.

 

[Riverdale Rink Rat]

I'm a tax lawyer.

My friend, you could have stopped there. As you say -- back to bubble talk!

So let me throw this out there to the crowd -- we're (most probably) back in Toronto come July/August. Buy? Rent short term or long term? What does the UT hivemind think? Right now, I'm in the 'we've got a top put in, but no bottom yet' crowd, so I'm thinking rent.