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Archive for the 'CRA cracking down on condo buyers' Category

CRA cracking down on condo buyersThe recent condo boom has meant great business for real estate sales professionals that work in the condo market and has led to some great investments for clients. However, with investments come added responsibilities and unfortunately many new owners of investment properties don’t know how to properly plan or prepare for tax reporting and tax obligations to the Canada Revenue Agency.

It has been well reported over the past year that the Canada Revenue Agency has been cracking down on condo flippers and has audited hundreds of condo owners. In March of 2014, the CBC reported that CRA appears to be focused on individuals who have purchased and sold condos quickly and the number of those audited had risen to 579 (http://www.cbc.ca/news/canada/toronto/canada-revenue-agency-cracking-down-on-condo-sales-1.2582462).

MortgageBrokerNews.ca reported that its sister publication, Canadian Real Estate Wealth, recently quoted real estate lawyer and lecturer Mark Weisleder as saying: “If you buy a new condo from a builder and flip it shortly after closing, firstly you may have to repay the HST rebate portion of the purchase price because you did not move in or rent it out…This can be close to $30,000 in some cases. In addition, if you sell shortly after closing, CRA considers this business income and not a capital gain, so you will be expected to pay tax on the full amount of any profit made.” http://www.mortgagebrokernews.ca/news/taxman-after-condo-owners-177107.aspx

If your client is purchasing a condo as an investment, either for monthly income or in the future to sell for a profit, or you are representing a client who is selling an investment property, as a real estate sales professional you can help.

If it is a property that is subject to capital gains tax, your client will need to know the value of the property at the time the property was purchased and the value at the time sold. You can access sales history information for your client using GeoWarehouse.

You can also help your client estimate what their profit will be in the property by generating comparable sales in the area and an estimated list price.

You can educate your client that any income or investment property could be subject to additional reporting and taxation requirements and recommend that they research these requirements on the Canada Revenue Agency website and consult/establish a relationship with a good accountant that can provide professional advice accordingly.

As a real estate sales professional your clients look to you for guidance. While some things are your responsibility and others may not be, the more information you can offer to guide your client in the right direction or to the right information, the better their experience with you will be, as will be the likelihood for repeat business.

For more information about estimating a property value or about GeoWarehouse please visit www.geowarehouse.ca or call 1-866-237-5937.

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