# Got a CRA letter for possible unreported sale of condo income



## veshiote (May 14, 2013)

Hi forum,

Just got a CRA letter for possible unreported sale of condo income. I believe it's a mistake but since I have not experienced in CRA audit matter at all, I'd like to seek out information here before I call CRA to clarify.

Here's the story:

My wife and I bought and were living in a condo since 2010. In 2013, we were expecting our first child so we looked and eventually bought a house. We moved into our new house in June, 2013. At the time, we were not sure if we want to get rid of the condo. I entertained the idea of renting it out but eventually we decided not to do that, so we listed our condo in the middle of June and sold it in the middle of July, 2013. During that month-and-halfish period, the condo was vacant; we did not rent it to anyone. I heard you have a grace period of something like half a year to sell your old property before it's considered not-your-primary-residence and hence subject to taxation when sold, but I couldn't find a reference.

Has anyone ever in a similar situation? Any input is well appreciated!

Thanks,


----------



## Guban (Jul 5, 2011)

Are you looking for this form? T2091? Check out line 19. It says plus one year.

http://www.cra-arc.gc.ca/E/pbg/tf/t2091_ind/t2091ind-14e.pdf


----------



## Just a Guy (Mar 27, 2012)

You have a year to sell it. Call your accountant or CRA directly. You probably just need to provide some, from the sounds of it, easily obtainable proof.


----------



## VideoTaxJoe (Jun 24, 2015)

Veshiote - It sounds like you have been caught up in one of CRA's condo projects. Basically they identify people that sell condos a short time after purchasing them. "Condo Flipping" 

They generally try to argue that you purchased the condo with the intent to make a profit on it rather than to use it as your residence. In other words they are saying that you are in the "business" of buying and selling condos. Filing the form above (T2091) helps, however, it doesn't necessarily win the argument. The key for you is to demonstrate that your intention when buying the condo was actually to live there. 

Quite honestly, I'm a bit surprised that you were selected because 2.5 years is a fairly substantial time...usually the people caught up in this net have bought and sold within a year.

When you talk to the CRA, you can ask them if this is part of the project, although not all agents would actually answer. Any proof you can give that your intention was to live there as opposed to flipping the condo is beneficial. Some factors may include...a history of not buying and selling...changes to to the building you made that may actually have decreased the value...an explanation of why you bought and sold when you did (kid coming)...things you may have done to indicate that you really were planning to stay there for a while.

You may also want to do as Just a Guy suggests and chat with an accountant about it.

I hope this helps. Please keep us posted.


----------



## kcowan (Jul 1, 2010)

It sounds like a fishing trip to me. Just complete the form and maybe include a copy of the info you supplied to us. You have nothing to worry about. I believe you have a year to sell the former residence as long as it is not rented. Longer times need some further explanation, usually around market conditions and asking price.


----------



## Guban (Jul 5, 2011)

I don't think you should fill out the T2091 form. The instructions say that you should only fill it out if you have a capital gain, which you don't have. Check out the instructions in the link I gave above. It says so in the first couple of lines in the instructions.

You lived in the condo, so there is no concern. Call CRA.


----------



## veshiote (May 14, 2013)

Thanks a lot guys! Really good information here for me. I'll call CRA early next week and will keep you guys posted.
Cheers!


----------



## fraser (May 15, 2010)

NO need to be concerned. You simply got tagged in a current CRA project aimed at condo flippers. No doubt when and if you are required to submit your details all will be fine. 

CRA typically does a 'test' if there is income taxes to be recovered. If successful, they roll out the program. Not certain where they are in the scheme of things but I did read that they were getting data from the various provincial land titles office.


----------



## RBull (Jan 20, 2013)

As most other said you have nothing to worry about.

Your proof is simple and you're well within the rules with the condo. 

Good luck and let us know how you make out.


----------



## veshiote (May 14, 2013)

So I called CRA today. I told the agent the timeline, and made sure he knows that the condo I sold was our primary residence for almost 3 years. The call lasted about 5-7 minutes and in the end, he assured me that I don't need to worry about anything. They just want to "educate" and make sure people don't "forget" to claim their taxable income from property sales.

There wasn't any forms to fill out or need to prove my claim that the condo was our primary residence. Hope this helps anyone who happens to get caught by their fish net 

Thanks all!


----------



## Guban (Jul 5, 2011)

Thanks for letting us know the good news! Glad that we could help.


----------



## kcowan (Jul 1, 2010)

Thanks for letting us know the bad news that CRA strikes out at individuals randomly without regard for our tax laws.


----------



## VideoTaxJoe (Jun 24, 2015)

Great to hear!

kcowan - Just so you know, CRA random strikes have significantly decreased in the last year...and will decrease much more in the future. They have recently introduced risk based selection for individuals and small businesses (they've been using it with large businesses for a while). This means that almost everyone selected these days will be on the hit list for a reason...be it an odd claim, income or expense ratios out of line with industry standards, being in an industry or engaging in an activity where there is deemed to be a low level of compliance, or having some other hallmark of a high risk taxpayer. There will still be the odd random audit/review done to provide CRA with a baseline to compare the targeted audits to, however, they will be significantly lower than in the past.

While CRA definitely has room to improve, I do have to give them big credit for taking a very significant step in the right direction.


----------



## kcowan (Jul 1, 2010)

VideoTaxJoe said:


> While CRA definitely has room to improve, I do have to give them big credit for taking a very significant step in the right direction.


I guess we will withhold judgement until such random attacks stop. I am impressed with their myCRA efforts. I would like to fire their iT consultants, but the site itself is very helpful. I can always find out why they are thinking something by consulting their site (like their recent demand to pay arrears and penalty interest when their site show the payment made on April 24). Too bad we cannot get them to consult the site before sending out letters. It would improve their image of being marginally competent paper pushers.


----------



## fraser (May 15, 2010)

Over the past 35 years I have had three CRA desk audits...probably the result of special projects. Two concerned auto expenses. The third one was about one of those movie tax shelters. No issue on any of them. Just sent in the documentation and they were satisfied. Mind you, I might have had a different view had they resulted in a re-assessment.

There will always be an honesty challenge with the type of self reporting that we have for income tax. 

We have also done refiles, actually refiles on two years that were outside of the CRA limits for going back. No issue on them, CRA processed without comment. Perhaps we have been fortunate but our experience with Revenue Canada/CRA has not been negative.

The more sophisticated that CRA gets in chasing tax cheats the better. Just wish they would beef up their staff and really go after unreported offshore tax dodges.


----------



## Davis (Nov 11, 2014)

kcowan said:


> Thanks for letting us know the bad news that CRA strikes out at individuals randomly without regard for our tax laws.


Ken, that seems to pretty harsh. The CRA contacted the taxpayers, the taxpayer provided additional information by phone, and the CRA accepted the taxpayer's verbal confirmation. Since CRA doesn't demand full documentation upfront, and isn't all-knowing/all-seeing, it seems reasonable to ask for additional info from time to time, and doing so is permitted under our tax laws.

It looks to me that they were making reasonable efforts to ensure that the taxpayer was following the law, not striking out without regard for the law.


----------



## Just a Guy (Mar 27, 2012)

Wouldn't CRA know what the OP's permanent address was during that time period? I believe they mail the returns there, plus it's declared on the tax submission...they lived there for years, then moved. It doesn't sound like they own any other real estate, so where is the possible confusion?

This is one area that they didn't need to waste time verifying, they didn't need to scare the public, nor waste tax dollars on.


----------



## fraser (May 15, 2010)

Where someone's tax return is mailed does not necessarily indicate where they really live.

There are a small percentage of higher income earners who really live in Ontario (or Manitoba or BC) but have an Alberta address for tax reasons. Address of a friend, relative, whatever. 

Why? Marginal tax rate of 53 percent vs a marginal rate of 39 percent.


----------



## Just a Guy (Mar 27, 2012)

True, but you are allowed to claim 1 principle residence, and if you don't own others the odds of it being a tax dodge must be pretty slim compared to let's say...any senator's tax return.


----------

