It's worth a visit to the site to see what he was also saying about how condo investments have turned "toxic".As I told you more than a year ago, condo flippers, speckers, short-term owners and even many unsuspecting buyers could end up on pointy end of CRA, facing significant and totally unexpected tax bills. That seems to be ratcheting up into high gear now, with the tax cops papering Toronto and Vancouver with ‘questionnaires’ about condo buys and sells. If you receive one of them, have your dog eat it.
Always on the quest to find new money to support Mike Duffy and Pam Wallin, the feds are deep into audits on the Toronto condo scene. Anyone who bought a unit pre-construction, then sold for a profit without actually moving in, is liable for capital gains tax, and must also repay the GST/HST refund that residents receive. That’s pretty obvious.
But the revenuers are also after people who bought new condos, lived there for less than 18 months or two years, then sold for a gain. They, too, are being served with bills for capital gains and tax rebate repayment, since the time spent as occupants was not great enough to consider the condos to be principal residences. Instead, the units are being classified as investments – meaning you can deduct the mortgage interest from taxable income, but face tax on the entire proceeds. Now real estate brokers are being warned if they suggested this strategy to new-unit buyers at any time during the past seven years (the audit period), they could be sued by their former clients, the buyers.
By the way, there is no hiding. The CRA has access to every shred of information about purchases, assignments, sales, mortgages, commissions, rebates and profits. That includes lists of buyers provided by developers and sales data from land registry offices. Escape is futile. You are surrounded.
Condo-hopping has been a totally accepted method of harvesting real estate gains by people who thought that by living there, all profits were tax-free. It’s also been at the heart of strategies suggested endlessly by developers and promoters like the legendary Brad Lamb. It’s at the core of a flawed and dangerous strategy the cultists at REIN call ‘the property ladder.’ So, beware. CRA will give you tax-less profits on real estate only if it believes you bought the place to live in, not to diddle with.
What a refreshing concept.