Condo Flipping and Revenue Canada

I did not declare it was rented.  We flipped that unit No one will know.

Condominium Flips and CRA
Peter Clark  partner with Heenan Blaikie’s Taxation Law Practice Group. In his post, Peter discusses the potential tax implications of condominium flips.
 The Problem: We have heard that CRA is undertaking an “audit project” that is targeted at condominium flips. CRA is particularly interested in situations where the initial purchaser of the unit sells the unit without ever moving in or perhaps moves in for a short period of time and then sells the unit.  In either case, CRA will likely argue that the unit did not qualify as a “capital property” or as the purchaser’s “principal residence”.  If CRA is successful in denying capital treatment or principal residence treatment, then 100% of the flip profit is subject to tax as ordinary income.  CRA can also impose penalties and arrears interest if you profited from the transaction and did not report it on your tax return.
Quick flips can also create HST problems. You can lose the HST new housing rebate that you may otherwise have been entitled to.

Damage Control: Taxpayers who realized taxable income on an unreported condominium flip may be able to make a voluntary disclosure to CRA.  This will avoid penalties, but not tax and arrears interest. 

 Around our office recently a number of agents were discussing  University Students being audited on their TAX Credit claims.  One of the audit questions was who received the rent claimed.  Simply Put who was the Landlord?

This creates a number of separate issues;   Builder / Developers are providing purchaser lists when requested to CRA as they are claiming back HST.  It is not difficult in an era of electronic filing to look up the original contract name then cross reference the final purchaser.  ( Each Flip is responsible for LTT).

What is the lesson here?