Federal Budget 2022: Ottawa to Implement Canada-Wide Anti-Flipping Tax

By of Merovitz Potechin LLP on Wednesday April 20, 2022.

The 2022 Federal Budget introduces a new deeming rule to ensure profits from flipping residential real estate are subject to full taxation. The proposed Anti-Flipping Tax would affect homeowners who sell a principal residence that they have owned for less than 12 months.

Property flipping involves purchasing real estate with the intention of reselling the property in a short period of time to realize a profit. Profits arising from dispositions of residential property, including rental properties, that were owned for less than 12 months, will be deemed business income and are fully taxable as business income. These properties would not be eligible for the 50% capital gains inclusion rate, or the principal residence exemption available to residential homeowners.

This is a change from current Canadian legislation which allowed a capital gains tax exemption on all principal residences.

Exemptions to the New Anti-Flipping Tax Rule

Exemptions to the proposed Anti-Flipping Tax rule would apply for Canadians who sell their home within 12 months due to certain life circumstances, such as death, disability, the birth of a child, a new job, or the breakdown of a relationship. The Federal Government indicates that exemptions will be set in forthcoming rules put forward for consultation in draft legislation.

“This new measure will ensure that investors who flip homes pay their fair share, while protecting the current, vitally important, principal residence exemption for Canadians who use their houses as homes.”, the budget reads.

These measures would apply in respect of residential properties sold on or after January 1, 2023. If you have any questions about the proposed Anti-Flipping Tax, contact the Real Estate Lawyers at Merovitz Potechin LLP.