Federal

Property flipping are the transactions of purchasing residential property and reselling the property in a short period of time to realize a profit.

The profit from property flipping is fully taxable as business income and does not qualify for the 50-per-cent capital gains inclusion rate or the Principal Residence Exemption. Previously such income would only be taxed if the owner did not reside in it. When taxed it was generally considered to be a capital or holding gain.

A “flipped property” of a taxpayer is a housing unit (examples: single family house, condo, townhouse etc) located in Canada, that is not already considered to be inventory of the taxpayer and was owned by the taxpayer for less than 365 consecutive days prior to the disposition (12-month holding period). The Flipped property definition does not apply where the disposition can reasonably be considered to occur due to, or in anticipation of one of the following life events:

• The death of the taxpayer or a person related to the taxpayer.
• A related person joining the taxpayer’s household or the taxpayer joining a related person’s household (e.g., birth of a child, adoption, care of an elderly parent).
• The breakdown of a marriage or common-law partnership of the taxpayer, where the taxpayer has been living separate and apart from their spouse or common-law partner for at least 90 days prior to the disposition.
• A threat to the personal safety of the taxpayer or a related person (e.g., the threat of domestic violence).
• The taxpayer or a related person is suffering from a serious disability or illness.
• An involuntary termination of the employment of the taxpayer or the taxpayer’s spouse or common-law partner.
• An eligible relocation of the taxpayer or the taxpayer’s spouse or common-law partner (e.g., generally, a relocation that enables the taxpayer to carry on business, be employed or attend full-time post-secondary education).
• The insolvency of the taxpayer (e.g., due to an accumulation of debts).
• The destruction or expropriation of the property (e.g., where the property is destroyed due to a natural or man-made disaster).

In the case of a taxpayer who owns a right to acquire a housing unit located in Canada, the 12-month holding period resets once the taxpayer who entered into a purchase and sale agreement secures ownership of the property. 

It is important to discuss your disposition of housing with us if you are contemplating selling any housing prior to the end of the 12 month holding period.

BC Provincial Flipping Tax

In addition to the federal flipping taxation BC has introduced a new tax applicable to properties sold within the first 2 years of ownership.

The intent is discouraging short term speculation or profiting from the sale of property. Specifically, the tax will apply to income earned from the sale of housing units or property zoned for residential use. The tax will not apply to those who add to the housing supply or engage in construction and real estate development.

Additionally, you will be exempt from the tax if “life circumstances” motivated the sale. Examples of such circumstances include:

• Separation or divorce
• Death
• Disability or illness
• Relocation for work
• Involuntary job loss
• Change in household membership
• Personal safety
• Insolvency

The amount of taxation will start at 20% if sold in the first year and then will decline to zero if you hold it between 366 and 730 days.