CRA Focuses on Real Estate Non-Compliance

Buyers and sellers are quickly learning that the Canadian Revenue Agency is taking a serious look at real estate transactions in the growing Toronto and Vancouver markets. With the booming residential real estate growth in these Canadian metropolitan areas, the CRA is closely scrutinizing real estate sales and performing audits on questionable activity. Some of the specific non-compliance issues that the CRA is monitoring include:

1. Ambiguous Funding – When a buyer makes a sizable down payment on a property, the CRA recognizes that these funds may never have been reported as income for tax purposes.

2. Real Estate Flipping – Some investors fail to report their earnings from the swift turnaround on properties that are purchased and sold again for the purpose of a quick profit.

3. Unreported Capital Gains – When a home does not qualify as a principal residence, the real estate sale may have been unreported capital gains when there is positive revenue.

4. Unreported GST/HST – Any builder of a new home must collect GST/HST when the property has been sold. This also includes the sale of any significantly renovated properties. In some cases, builders fail to charge and collect these taxes.

In an effort to bring real estate transactions into compliance, the CRA has recently audited over 1,800 Ontario real estate files and successfully brought in almost $18 million in income taxes and about $32 million in GST/HST. In addition, the CRA has recovered $4.2 million from British Columbia real estate in income taxes and $10 million in GST/HST. Due to CRA’s 2016 real estate audits, taxpayers should be aware that the CRA is focusing on any questionable real estate sale in Canada’s most popular housing markets.