Do you know that CRA is implementing a new anti-flipping rule in 2023?
Starting from January 1st, 2023, onwards, when you make a profit from the sale of a property that you own for less than 365 days, that profit is deemed to be business income, and 100% of it is taxable!
In this video, I dive deep into this new anti-flipping rule and how it affects you using easy-to-understand examples. I also share the 12 criteria imposed by CRA to determine whether the sale of the property is considered business or capital in nature. Then, I walk through the steps to evaluate these transactions in a flow chart.
Key Moments In This Episode
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1:36 - What the anti-flipping rule means
2:01 - Example to explain the anti-flipping rule
3:19 - How does the new anti-flipping rule apply, and how is it different from the older rules?
5:17 - Criteria to determine if the transaction is capital in nature and 50% taxable
8:16 - 12 criteria imposed by CRA to determine whether the sale of the property is considered business or capital in nature
8:43 - Criteria #1: Taxpayers' intention
9:54 - Criteria #2: Feasibility of taxpayers' intention
10:36 - Criteria #3: Geographical location and zone use of the real estate required
11:35 - Criteria #4-5: Extent to which intention is carried out by the taxpayers; Evidence that the taxpayer’s intention changed after the purchase of real estate
12:26 - Criteria#6: Nature of the business, professional calling or trade of the taxpayer and associates
13:31 - Criteria #7: Extent to which borrowed money was used to finance the acquisition and terms of financing
14:45 - Criteria #8: Length of time of ownership
15:22 - Criteria #9: Existence of other partners who share an interest in the real estate
16:56 - Criteria10: Nature of occupation of other investors involved in the deal and course of conduct
17:29 - Criteria #11-12: Factors which motivated the sale of the property; Evidence that the taxpayer has dealt extensively in real estate
18:44 - The special rule that applies if you dispose of a residential property within 365 days and make a profit
20:16 - 9 exception criteria for anti-flipping rules
21:33 - The decision tree
26:09 - Goal of the anti-flipping rule
hannel for more videos on Canadian real estate and tax-saving strategies so you don’t miss a thing!
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Real estate Tax planning is a personalized decision and will depend on your situation, priorities, and risk tolerance. Consult with your legal and tax advisors to ensure you get the best personalized advice.
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