CRA extends condo flip probe to Toronto
November 9, 2017
After taking two Vancouver condominium developers to court in a probe of potential tax avoidance on the flips of new condos, Canada Revenue Agency (CRA) has extended the probe to Toronto.
The agency is analyzing 2,810 transactions involving cases of pre-construction condominium flipping in Toronto to determine whether audits need to be carried out to find tax evaders, according to the Canadian Press.
In most cases, the audits focus on assignment sales in which a new condo is purchased from a developer and then sold to another buyer before the condominium building completes.
Such assignment flips are legal, but there is suspicion that some sellers are not fully reporting any profit as taxable income or as a capital gain.
The average selling price of a condo in the Toronto area in the third quarter of this year rose 22.7 per cent to $510,206 from the same quarter last year, according to the Toronto Real Estate Board.
The Real Estate Board of Greater Vancouver reported that the benchmark price of an apartment in Greater Vancouver in September was $635,800, up 21.7 per cent from September 2016.
This July, CRA obtained court orders against developers behind two Vancouver condominium projects.
Federal court documents reveal that the CRA’s Business Intelligence and Quality Assurance division has put assignment agreements under a microscope after identifying “a potential area of non-compliance” over failing to declare financial windfalls from flipping units to other buyers before a condo’s construction has been completed.
Many of the assignment condos are listed on classified web sites, such as craigslist.com.