Archive: April 2013 4 articles

Condo investor or condo flipper? CRA wants to know….

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With tax time looming, many condo investors could find themselves owing a lot more in tax than they thought. That’s because the CRA is apparently cracking down on condo flippers.

Here’s a quick crash course:

If you buy a condo and then sell it after having lived in it as your principal residence for a minimum of 6 months, you are, of course, capital gains exempt. But if you buy it as an investment, you are subject to capital gains tax. So a $100,000 gain at a 46% marginal tax rate will result in a $23,000 tax bill (50% of the gain is taxable). But if CRA decides that you are in the business of flipping condos, your $100,000 profit will be taxed as pure income – meaning that the tax bill will be the full $46,000 in the above example.

So the interesting distinction is between owning a condo as an investment versus being in the business of flipping condos. If you own the condo through the registration period, rent it out for a while and eventually sell it, you will most likely be deemed as being an investor. But if you sell your rights to the property before it's registered (i.e., selling your assignment), you will definitely be regarded as being a "flipper" (meaning that you are in the business of flipping condos). You may want to adopt a conservative approach on this one given the fact that CRA is apparently cracking down on abuses and because there are also hefty fines involved if you are deemed to have mis-filed. For more on this topic, please click here.

 

 

TREB wins battle with Competition Bureau

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The Competition Tribunal dismissed, with costs, the anti-competitive complaint of the Competition Bureau against TREB yesterday. Read about the Tribunal’s decision on REM's Website and The Toronto Star.

This is a major victory for TREB which has maintained that the consumer’s right to privacy should prevent sensitive information such as the sales price history of homes from being openly circulated on the Internet through so-called VOWs (virtual office websites).  We applaud this decision for a number of reasons but primarily because the MLS® system was built and paid for by REALTORS® over a very long period of time and, as a result, should not be made available as a “public utility”, even if a minority of REALTORS® want open access to support their particular business model. We believe that, since the MLS® system is an asset of CREA, only REALTORS® as a whole should be able to alter the accessibility of the system. Clearly most REALTORS® do not support the change sought by the Competition Bureau and so the Tribunal’s decision, regardless of how it arrived at it, was the correct one. Comments?

Scotiabank CEO Rick Waugh is the first banker to openly critique Finance Minister Jim Flaherty

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Scotiabank CEO Rick Waugh has become the first banker to critique Finance Minister Jim Flaherty for openly meddling in the mortgage market. While Mr. Flaherty’s concern for the country’s overall level of household debt and its potential impact on our economy is perhaps warranted, we believe that this concern should not manifest itself by interfering in the pricing practices of individual lenders. Both the Bank of Montreal and Manulife Financial were strongly pressured by Mr. Flaherty to suspend their recent 5-year fixed mortgage rate special offers. Our opinion is that the Department of Finance and the Bank of Canada should resort to typical measures of government policy (such as the setting of the central bank interest rate) in exercising their mandate to protect our economy. Moral suasion is one thing but open interference in the price setting or promotional practices of lenders is another matter altogether. What do you think? A few articles on the topic can be found here and here.

Microsite Videos

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More and more of our clients are posting their own videos on the microsites that are associated with either their Realty Sweep™ or Keep in Touch™ newsletter. That’s really great to see! If you’re farming, it’s almost like having a “fireside chat” with your farm area prospects each and every month. If you’re working your referral base, it’s like being able to speak to your entire database of contacts in one fell swoop!

Even if you’re too busy to record your own video, there are some other easy solutions to customize your microsite content. One great example is simply posting a virtual tour of a key listing and then adding some brief commentary in the personal message box.