Buyers may choose or be forced to sell their pre-construction purchases for many reasons. Construction is taking too long, their circumstances change, or something more appropriate comes along. Often peoplesell their pre-construction condo and unexpectedly end up owing additional taxes, interest, and penalties.
There is nothing inherently wrong with selling a pre-construction condo. Whatthe CRA is looking for, however, is whether the increase in value is reported correctly. Depending on when in the path to final completion the condo is sold, the former owner may claim it as a primary residence or as a sale of capital property. These claims are harder when selling a pre-construction condo before completion or soon after completion. This doesn’t mean the condo wasn’t your primary residence or wasn’t capital property. It just means you have to prepare to prove that it was. In Canada, the CRA can make assumptions and you, as taxpayer, have the onus of proving them wrong
The CRA will look to see whether the purchase and the sale match a claim for the condo as a principal residence, a capital property, or inventory of a business. The considerations in differentiating between the different characterization of the sale can be very complex. These considerations include the reason for the purchase and any proof for that reason, and the reason for the sale and proof of those reasons. These two, however, are just the tip of the iceberg.
FAQ’s on Getting a CPA in Hamilton, ON
How do I sell my preconstructed condo?
Review the agreement of purchase and sales (APS) and consult with your realtor before selling your preconstructed condo. Then, seek the approval of the builders, so your property can be listed on the approved sites.
How much can I earn from flipping pre-construction condos?
Flipping pre-construction condos can provide high returns on your investment. However, the Canadian Revenue Agency (CRA) is already looking closely at this type of sales. This means while you can earn money from selling a preconstructed condo, you would have to pay capital gains tax and harmonized sales tax (HST).
What taxes, interests, or penalties do I owe for selling my pre-construction condo?
CRA classifies pre-construction condo contract sellers as builders. This means you have to pay the capital gains tax, which has a 50% rate of inclusion, and the HST, which applies to the deposit you get back when you make the sale and the profits from the price markup.