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If your client is considering flipping houses to benefit from strong prices, remind them of the tax consequences.

Property flipping is when property owners, including real estate agents, buy and resell homes in a short period of time for profit, says CRA in a release.

“This also includes buying and selling a property before its official sale or construction—a process called an assignment sale but sometimes also referred to as shadow flipping,” says the agency.

Money made on all real estate transactions must be reported to CRA, including money from flipping and assignment sales (of both pre-construction and resale homes). “This could also include fees or commissions generated on these transactions,” says CRA, adding that GST/HST might also apply to the transactions and would have to be submitted to the agency.

Read: CRA reminds business owners to collect GST

Profit from flipping real estate is generally considered fully taxable as business income. The principal residence exemption doesn’t apply.

More on house flipping and how CRA addresses non-compliance in the real estate sector can be found on CRA’s website.

Also read:

Best tax options to transfer the cottage to kids

Don’t let a vacation property dream become a tax nightmare

Originally published on Advisor.ca
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