Dominic Darmanin

Cell: 604-788-1476 |

New CRA Principal Residence Rule to help Monitor Flippers

New CRA Principal Residence Rule to help Monitor Flippers

 

In an effort to clamp down on “flippers” also known as “shadow flipping” CRA now requires that home sellers complete a newly updated Schedule 3 Capital Gains (or losses in 2016) in order to claim the capital gains exemption.

 

This change came into affect in October of 2016. Prior to this change CRA did not require home sellers having to report the sale of a principal residence if the entire gain was tax exempt.

 

According to the Income Tax Act “principal residence,” one of the key conditions is that it must be “ordinarily inhabited in the year by the taxpayer, by the taxpayer’s spouse or … by a child of the taxpayer.” Revenue Canada will check into the listing information when the property is sold as well as  investigate who was paying the hydro bills and other utilities during the ownership period. So CRA will conduct its due diligence to look for inconsistencies with its definition of what it regards as “principal residence”.

 

Once again the misdeeds of a relative few have necessitated these changes to prevent opportunists from manipulating the tax system to their personal advantage. There seems to be a lot of that going on lately at the municipal, provincial and federal levels of government. All three levels of government are constantly reacting with new regulations to close any loopholes that are being exploited and abused by these intrepid investors. But as old loopholes are closed, new loopholes are exploited which, when discovered, require further government regulations. So in the end, we all pay one way or another.

 

Welcome to the “new” Canada!

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