House flipping can be profitable — but it’s also one of the CRA’s biggest audit targets. Many taxpayers don’t realize that a single mistake can lead to a full reassessment, interest, and even penalties.
1. Selling Within 12 Months Without an Exception
Any property sold within a year is presumed a flip and fully taxable as business income. The principal residence exemption does not apply.
2. Not Reporting the Sale
Since 2016, all home sales must be reported. Failure to disclose can lead to penalties and CRA suspicion.
3. Frequent Flipping Without Documentation
Even beyond 12 months, a pattern of buying/selling can result in CRA treating profits as business income.
4. Misunderstanding Assignment Sales
Pre-construction assignment sales are often taxed as business income, and may also involve GST/HST obligations.
5. Ignoring Exceptions
Divorce, job relocation, illness, or insolvency may exempt you from flipping rules — but you must provide strong proof.
The Consequences
– 100% taxable profit
– Interest and penalties
– CRA may reassess prior years
How to Avoid These Mistakes
– Always report sales
– Keep receipts and agreements
– Seek legal help early
If you’ve been reassessed for house flipping, don’t panic. Request a free case assessment with Beganyi P.C. Law Firm — we’ll review your file, check for exceptions, and defend your case with CRA.