In an attempt to cool off the housing market the federal government has implemented an anti-flipping rule on properties.
Any residential property that has been held for less than 12 months is considered ‘flipping’. This means that the profits on that property will be considered business income, and will be subject to full taxation. The property will not be eligible for either capital gains treatment (which is 50% of the gain), or the principal residence exemption.
This new tax will be applied to any property sold after January 1, 2023.
In addition, the Fall Economic Statement proposed to extend this rule to assignment sales. Therefore, profits arising from an assignment sale would be deemed to be business income if the rights to purchase a property were assigned after having been owned for less than 12 months.
Exempt from this rule are life changing events that otherwise explain the quick turn-over of the property, including a birth of a child, new job, separation or divorce, death, disability, insolvency, or other significant changes in life circumstances.