We apologize for the delay since our last blog post but the CRA has kept us busy! In earlier posts we discussed the audit practices of CRA vis-à-vis real estate. Many taxpayers believe they will not get caught selling assignments at a profit. We must emphasize that this is incorrect. The CRA is demanding lists of purchasers from the developers and comparing those lists to who is eventually registered on title. Any name on the former that does not appear on the latter is virtually guaranteed to be audited. Any taxpayer who has previously sold an assignment but has not declared the gain (assuming there is one) as taxable income should file a voluntary disclosure immediately to avoid gross negligence penalties (50% of taxes owing).
An additional problematic aspect of selling assignments is that the CRA may deem the vendor of an assignment a “builder” for HST purposes and request HST be remitted on the sale price. This can create a large burden on the taxpayer as HST is payable immediately. Collection activity on HST owing begins immediately after a notice of reassessment is issued. We have successfully defended against this HST attack by CRA on behalf of many of our clients by having our clients not deemed to be a “builder” for HST purposes.
If your real estate transactions are being audited, we can help. If you have undeclared real estate dispositions, we can help. Please do not hesitate to contact the head of our audits and appeals department at firstname.lastname@example.org.