This is not legal or tax advice, but merely a recounting of some (rather scary) experiences of some of our clients.
With HST rebates of about $30,000 per unit, the CRA and their collection agents (the new home sellers) have (we are told) hired additional staff to “crack down” on tax fraud where the Ministry of Finance (Land Transfer Tax) reports multiple transactions from the same person(s). Buyers mostly fall into one of 3 categories:
Moving In – No problem.
Renting- You pay the full HST (rebates are added back to the purchase price) to builder and will likely recover all the rebates 3-6 weeks later upon application to CRA: http://www.cra-arc.gc.ca/E/pbg/gf/gst524/README.html
Flipping-Big problem. Like Renting, no principal residence exception to capital gains tax. Worse if CRA deems the flipping as income from a business (where profits are taxed as income not capital gains) if flips are frequent and form a substantial part of taxpayers income. Also NO HST REBATE. Also figure about 10% of the tax owed for penalty and 4% over TBill rate for interest see http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/rtrns/pnlts-eng.html
CRA and builders are increasingly asking for drivers licenses, utility bills (in addition to the usual sworn statements) linking buyer(s) name(s) to the new address. Also, please don’t ask us to swear your false or misleading statements so that your tax problem also becomes our ethical problem.
If you can’t cover the tax and transactional costs on the flips, get out of the game and the CRA will have to look elsewhere for its money. You definitely need specialized tax/legal advice. We can refer or there’s always those tax lawyer guys advertising on 680 News and TV.
