Flipping Preconstruction Townhome

jay_jay wrote: ↑ Hello,

I recently booked a Preconstructions town home in Brampton, 4 bed Free hold sells for a 1M.
Closing is about 1.5 years from now.

Assuming I need cash after a year (months before closing), Can this be sold ? (this is how many folks have even been making money, I wanted to hold hence didn't research much).

Under 1M price, I couldn't get a close 2000 SQFT 4 bed townhome.. so ended up chasing this..

** Price includes HST.

Thanks.

jmc111 wrote: ↑ You need to check with the builder if there is an assignment clause in the APS and verify what the builder will charge you to re-assign to another buyer. Also, be aware that CRA may be watching at these types of dealings as it could mean capital gains tax if you already own a primary residence.

oasis100 wrote: ↑ Assignment clause? a lot of builders do not allow for assignments for Single family homes/towns.

jay_jay wrote: ↑ There is an assignment clause and it restricts me unless the builder permits.

jmc111 wrote: ↑ Also, be aware that CRA may be watching at these types of dealings as it could mean capital gains tax if you already own a primary residence.

Canadadesi wrote: ↑ Genuinely curious - at what point is the CRA involved in assignment sale? I suppose you have to provide SIN# to trigger any CRA activity - but I could be wrong there.

CD

kangarooz wrote: ↑ Lol @ the point where you make money thats when the CRA is involved, they want a piece of your pie. Depending on how you structure your deal there could be some serious tax implications. Defiantly speak with a RE tax accountant before assigning for sure.

jmc111 wrote: ↑ You need to check with the builder if there is an assignment clause in the APS and verify what the builder will charge you to re-assign to another buyer. Also, be aware that CRA may be watching at these types of dealings as it could mean capital gains tax if you already own a primary residence.

Canadadesi wrote: ↑ I suppose I wasn't clear in my query. I am trying to understand which step in the transaction triggers CRA involvement. At booking - there is just a name on the document and payment via bankers cheque. On assignment the money flows directly into your account. No cash involved for the bank or teller to flag the transaction.

Random inspection of your banking or anonymous tip to CRA notwithstanding, they may not be able to track thousands of assignments happening every year unless the builder shares information of those who booked but didn't close.

Genuinely curious. I am not involved in any transactions and have no skin in the game. Academic interest only.

CD

seatiger wrote: ↑ This is not 10 yrs ago anymore. CRA knows how by now.
Assignment will trigger GST, lawyers will do it anyway. CRA gets paper trail.
buyer who claim GST rebate will also leave paper trail.
CRA aslo randomly ask builder to provide list of customers and assignments.

Canadadesi wrote: ↑ The final closing is between builder and new buyer. The assignment seller is nowhere in the GST/ HST record. The assignment sale lawyer HST is a minuscule amount which no one even notices.

Trust me, I am not disputing that it's risky and taxable. Just trying to pinpoint the source that can trigger the enquiry. A random audit is always a possibility with or without assignment sale.

CD

seatiger wrote: ↑ The closing of the land title is between buyer and builder, but thats not what I point out.
I am pointing out that the assignment sale itself between assignor and assignee is a GST taxable event.
say original townhouse sold for $500k+GST=$525k in presale by builder to assignor, paid $100k deposit.
Assignor list the townhouse for $550k, will collect deposit paid $100k + premium $50k, + GST on premium $2500.
Remitting the $2500 GST will leave a paper trail. You can count on RE agents and lawyers do in fact include this $2500 in all papers, and in some case, even remit the $2500 to CRA directly.

Plus, assignment fees is GST taxable, builder will collect & remit this. CRA can and will get builder's ledger of income subject to GST by a simple GST review easily, and there, nail all the assigners. They know this is a gold mine now.

Also, in BC, effective January 2019, developers are required to collect information about each assignment, including certain personal information, and input it into the Condo and Strata Assignment Integrity Register (CSAIR).
not sure if ON has similar thing.

Canadadesi wrote: ↑
I suppose I wasn't clear in my query. I am trying to understand which step in the transaction triggers CRA involvement. At booking - there is just a name on the document and payment via bankers cheque. On assignment the money flows directly into your account. No cash involved for the bank or teller to flag the transaction.

Random inspection of your banking or anonymous tip to CRA notwithstanding, they may not be able to track thousands of assignments happening every year unless the builder shares information of those who booked but didn't close.

Genuinely curious. I am not involved in any transactions and have no skin in the game. Academic interest only.

CD

Jon Lai wrote: ↑ Unless, of course, the seller asks for the premium under the table...

kangarooz wrote: ↑ What Jon suggests is the really the only way to get away with this, cash. In Canada no way a bank will help you hide info from the CRA. To answer your specific question, when you close your unit you have to pay HST and claim it back for the most part, esp for an assignment.

Ofc with all tax related queries, if you lie and if they dont audit you...

skeet50 wrote: ↑ Don't forget that if you sell property you are obligated to report the income you earned on your income tax form. An assignment sale is included as the sale of property. https://www.canada.ca/en/revenue-agency ... ncome.html.

The penalties for non-compliance are steep: https://www.canada.ca/en/revenue-agency ... ector.html

jmc111 wrote: ↑ Yup. Looks like those who do assignments "think" they can get away with it.

Selling a property other than your principal residence

If you sell a property other than your principal residence for more than you paid for it, you may have a capital gain or it may be considered business income. Similarly, if you sold the property for less than you paid, you may have a capital loss or business loss. In all cases, you must report this information on your income tax return. A secondary property may include a rental property or a recreational/vacation/seasonal property.

If you buy a property with the intention of re-selling it at a profit, your profit from the sale is fully taxable. This could include a property you bought, renovated and then re-sold (flipping). This could also include a property that you bought before it was built and then re-sold before building was complete (sometimes called an assignment sale). Find out about the tax effects of buying real estate to sell for a profit.

Big brother is watching and unless you do a cash deal or bitcoin, there is a trace. Worst case it's called an audit. It can hang over you for years and then CRA comes knocking one day.