# Capital Gains on Condo - help



## davext (Apr 11, 2010)

Hi,

The CRA is asking me to pay capital gains on a condo. This is a new condo so I moved into the condo during the occupancy period and lived there. 6 months later, the condo finally closed. However, I moved out the condo 1 day before it closed, and I also listed the condo for sale on the day it closed with the Condo Builder. 1 month after that, I closed the sale of the condo to another purchaser. 

It was about 5 years from the time I signed the purchase agreement to the time that the condo finally closed. 

I guess what they are saying is that I did not live in it when I actually owned it and the period that I did live in the condo doesn't count as determining primary residence since it was the occupancy period. 

Anyone have any opinions or knowledge about this? 

Thanks! I will be contacting a lawyer about this but I would like to see what other opinions people have.


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## Charlie (May 20, 2011)

You'll have to establish that your intent was to live there when you bought. 

What changed? 

Just living there six months or so doesn't cut it. It looks very much like a flip unless there are extenuating circumstances for the quick sale. Your history with real estate, changing work or family, etc will all come into play.


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## MoreMiles (Apr 20, 2011)

You wanted to flip and got caught. Before the closing, the condo was not yours. Think of the occupancy period as a rental from the developer so it is not the same as living in your owned property. 

Also watch out for HST, they may be after you for that too because you may not qualify for the rebate portion anymore.


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## davext (Apr 11, 2010)

Charlie said:


> You'll have to establish that your intent was to live there when you bought.
> 
> What changed?
> 
> Just living there six months or so doesn't cut it. It looks very much like a flip unless there are extenuating circumstances for the quick sale. Your history with real estate, changing work or family, etc will all come into play.


What changed? Well when I bought it in 2005, I wanted to live there. By the time I was finally able to occupy the condo, I was in a steady relationship with someone that had her own condo. We decided to get engaged and get married and live in her condo. 

I got engaged about a couple months after I sold the condo, and married 1 year later. I had already told them that, which is probably why they told me that they would not consider this as business income.


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## davext (Apr 11, 2010)

MoreMiles said:


> You wanted to flip and got caught. Before the closing, the condo was not yours. Think of the occupancy period as a rental from the developer so it is not the same as living in your owned property.
> 
> Also watch out for HST, they may be after you for that too because you may not qualify for the rebate portion anymore.


I think you're right in that I did not really live in the property during the ownership period, only during the occupancy period. But if I just lived there a few days longer, then I could say that I did live during the ownership period. I feel that maybe a judge would be a bit more lenient if I fought this.


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## MoneyGal (Apr 24, 2009)

Well, the "ordinarily inhabited" rule is usually determined on the basis of fact, not intention. Here's a link to the technical bulletin from CRA, read the "ordinarily inhabited" section: 

http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s1/f3/s1-f3-c2-eng.html#N1033D

Section 2.90 of the same guide speaks specifically to ownership issues with condo properties and notes that ordinarily condos are not considered owned (and thus available for "occupation" as a PR) until the closing is complete. Here's what it says: 

_2.90 When acquiring a residential condominium unit, it is not unusual for a taxpayer to make a down payment, to enter into an agreement of purchase and sale, to enter into an occupancy agreement and to take possession prior to the registration of the condominium. The occupancy agreement may provide for payments which reflect the carrying costs of the condominium until the purchase transaction can be completed. *Normally in such a situation, the taxpayer does not own (either beneficially or legally) the condominium unit until the condominium is registered under the relevant provincial legislation and the purchase transaction has closed.*
_

So my read is that you didn't "inhabit" the property as your PR for tax purposes as it was not actually available, for tax purposes, for occupation; no matter what your intention. The fact that you listed *on the closing date* is also not going to auger in your favour in this case. 

Is 5 years really common from purchase agreement to close?


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## marina628 (Dec 14, 2010)

For condos 3-5 years is normal when building highrise .And we all know what can happen to prices in that time which is why many decide to sell rather than live in it.Surprised the lawyer did not advise him of the tax consequences if he sold so soon.


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## MoreMiles (Apr 20, 2011)

marina628 said:


> For condos 3-5 years is normal when building highrise .And we all know what can happen to prices in that time which is why many decide to sell rather than live in it.Surprised the lawyer did not advise him of the tax consequences if he sold so soon.


Many real estate lawyers are simply bad. I personally bumped in to lawyers "forgetting" to tell their customers the first-time buyer benefit of land transfer taxes, RRSP, etc. Their defense is... you did not ask. Really? If a customer knows to ask for it, then what exactly do they do.

They also told me that they don't care about title search or pre-sale checkup these days any more.... because a title insurance will cover issues if the title is not clear anyway. So they insist on their customers spending more money to buy title insurance, to protect their sloppy works :rolleyes2:


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## kcowan (Jul 1, 2010)

People often ascribe too much competence to a lawyer. If the lawyer can advise on the best tax approaches, they are an exception.

Similarly don't believe anything a real estate agent tells you. Trust but verify.

(I would take the exemption on the basis of intention but be prepared for CRA to reject it.)


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## MoneyGal (Apr 24, 2009)

Well, for what it's worth this audit is likely part of a larger CRA initiative called the "CRA Condo Project," designed to catch condo flippers.


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