In Canada, under the new anti-flipping rule, 100% of the profit made from the sale of a flipped property is taxed as business income.
The definition of a “flipped property” includes any residential property that was owned by the taxpayer for less than 1 year before its re-sale.
This deeming rule will not allow a taxpayer to utilize the “principal residence” exemption even if the property meets the definition of a principal residence.
So if the property was owned by the taxpayer for less than one year prior to its sale, the profit is taxed as business income (100%) and not as a capital gain.
Are there exceptions?
Yes. One is divorce. The tax rules exempt separating spouses from the anti-flipping rules.
Steve Benmor, B.Sc., LL.B., LL.M. (Family Law), C.S., Cert.F.Med., C.Arb., FDRP PC, is the founder and principal lawyer of Benmor Family Law Group, a boutique matrimonial law firm in downtown Toronto. He is a Certified Specialist in Family Law, a Certified Specialist in Parenting Coordination and was admitted as a Fellow to the prestigious International Academy of Family Lawyers. Steve is regularly retained as a Divorce Mediator/Arbitrator and Parenting Coordinator. Steve uses his 30 years of in-depth knowledge of family law, court-room experience and expert problem-solving skills in Divorce Mediation/Arbitration to help spouses reach fair, fast and cooperative divorce settlements without the financial losses, emotional costs and lengthy delays from divorce court.
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