Capital gains tax

[stefanie]

I am sure this question has been asked over and over, but I swear, I searched it up and down and found nothing that helped me.

We are thinking about flipping. Not as a full time job, but as a way to make a little money. We are looking at a property tomorrow and I think it will be "the one". So, my question is how does capital gains tax work...(in Canada)?

We hope to see about a 30-40K profit, give or take. If my researching is correct, I believe we would take 50% of that number and then pay income tax on it..?

Thank you in advance to anyone who might be able to shed some light on this subject for me.

 

[GaryMcGowan]

I would consult your accountant. In most cases the CRA will look at your intent.
What is your intent for this investment? To flip in 6 months, 1 yr, 2 yrs, 5 yrs.
If you plan to only have this property for a short period of time (less than 2 yrs) it will be taxed as income and not capital gains. But you mentioned you do not want to make this a full time endeavor so your accountant may be able to push it through as capital gains which is want you want.

There are accountants on this forum and they may be able to give you a clearer answer.

 

[fumbrunner]

QUOTE (GaryMcGowan @ Jan 15 2010, 08:06 PM) I would consult your accountant. In most cases the CRA will look at your intent.
What is your intent for this investment? To flip in 6 months, 1 yr, 2 yrs, 5 yrs.
If you plan to only have this property for a short period of time (less than 2 yrs) it will be taxed as income and not capital gains. But you mentioned you do not want to make this a full time endeavor so your accountant may be able to push it through as capital gains which is want you want.

There are accountants on this forum and they may be able to give you a clearer answer.

Yes, CRA will look at your intent.  Timeframes have little to do with how CRA will view your endeavour.  If you are flipping, then you need to view it as a business transaction and claim the profit as business income.  From what I hear from source at CRA, they are being more and more proactive in review "flips" that are being claimed as capital gains.  If you are renting the property, it would be an easier sell as a capital gain.  If you simply buy it, renovate it and sell it, there is no question that it would be treated as business income.

 

[Thomas Beyer]

QUOTE (stefanie @ Jan 15 2010, 06:18 PM) If my researching is correct, I believe we would take 50% of that ..yes .. if it is intended for LONG TERM HOLD ..

if flipping it is income so you pay tax on the full gain

 

[mfrayne]

How does Revenue Canada know of or track flippers? Is it not up the the person to do this? What if a person continues to roll profits from flips and short term sales into new properties and does not claim any of the gains on their taxes?

 

[fumbrunner]

QUOTE (mfrayne @ Jan 17 2010, 07:19 AM) How does Revenue Canada know of or track flippers? Is it not up the the person to do this? What if a person continues to roll profits from flips and short term sales into new properties and does not claim any of the gains on their taxes?
First off, they are taking closer looks at tax returns that claim capital gains from the sales of properties.  If you are not claiming income or capital gains, I do believe that large deposits at financial institutions get flagged.  I could be wrong on the second point, but I have heard that in the past.

 

[Thomas Beyer]

QUOTE (mfrayne @ Jan 17 2010, 06:19 AM) How does Revenue Canada know of or track flippers? Is it not up the the person to do this? What if a person continues to roll profits from flips and short term sales into new properties and does not claim any of the gains on their taxes?
they take "random pokes" and they use sophisticated computer software systems that look for unusual data .. some get lucky .. and some get caught ..

I hear of people stealing apples at Safeway .. some get caught .. and some don`t ..

Your life .. your decisions ..

 

[LifesMoneyPeople]

QUOTE (fumbrunner @ Jan 17 2010, 09:55 AM) First off, they are taking closer looks at tax returns that claim capital gains from the sales of properties. If you are not claiming income or capital gains, I do believe that large deposits at financial institutions get flagged. I could be wrong on the second point, but I have heard that in the past.

Yes banks flag anything over 10k. Insurance companies also do it but under 10k.

It is just to protect themselves and you. You would be surprised how many anti money laundering and terriost funding laws are out there and that is why they get flagged immediately

 

[REINteam]

Have you sent this resource in to [email protected] to be included in the resource directory? If not, please do so, including all relevant information, so that we can add it to our resource directory for future reference.



Thanks!