By: Luke Jones, Published on October 28, 2017 05:42 PM, Last Update on October 28, 2017 02:44 PM
The Canada Revenue Agency (CRA) is targeting nefarious condo flippers and has announced an audit of 2,800 condo sales in Toronto in an effort to find flippers who are not paying taxes.
In a report by the Globe and Mail, it is suggested the CRA will focus on finding presale condo owners who sold their units before they were completed. This is also known as paper flipping or selling on assignment. In markets like Toronto where property value increases in a matter of months, paper flippers can make profit by buying a condo and selling it before it’s finished.
Any profits made in this flipping is 100% taxable and while paper flipping is not illegal, the CRA believes there are many people poorly reporting or not paying their taxes on sales. The agency has commissioned the audit to find these people.
Paper flipping is believed to be a considerable factor in the state of the housing market in Toronto, where condo prices have skyrocketed and the cost of home ownership takes a considerable percentage of consumer income.
The Ontario government is attempting to solve the problem with a 16-points Fair Housing Plan. Among the plans is to address “practices that may be contributing to tax avoidance and excessive speculation in the housing market such as 'paper flipping.’”
Speaking to the Globe and Mail, Toronto tax lawyer William Howse says the CRA will make offending paper flippers to pay owed taxes and pay at least 50% in interest on top, while criminal charges are not out of the question.
“Anybody who assigns an offer, sells an offer for a profit will be caught by the CRA,” he said. “One hundred percent guaranteed that the CRA will be able to identify these sales and the amount of the gain.… For auditors, can you imagine how easy it is?”