If it’s your principal residence, there’s no tax, as long as you have the paperwork to prove it. However, the Canada Revenue Agency is taking a closer look at the condominium sector in what some in the industry have dubbed the “Condo Project.” Even if you own up to it being an investment property, you may not be allowed the capital gains tax break and that means a bigger hunk of your profit going to Ottawa.
Let’s say that your gain is $100,000 and your tax bracket is 46%. Capital gains are taxed at 50% so you would only owe $23,000 on that profit.
Not so fast! If the CRA says you are in the business of flipping condominiums, you should get ready to pay based on the gain being counted as income for a tax bill of twice the amount at $46,000. And, it gets worse. You could also face a fine of up to 50% of the tax owed for making a false disclosure.
A lot of condo investors are not aware of this crack down and you could get hit hard if you are purchasing a condo to flip it in a short time.
2013.April.30, George Harstgrove of Mortgage Alliance