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While real estate flipping isn’t illegal, the money made on real estate flips, including any real estate commissions and appreciation in value, must be reported to the CRA.

In its report, the CRA stated that it acquires and analyzes third-party data and has found that some flips are either not being reported at all for tax purposes or are being reported incorrectly. The profits from flipping real estate are generally considered to be fully taxable as business income, as opposed to a capital gain (which is only half taxable).

Unreported GST/HST on the sale of a new or substantially renovated home

While the sale of used housing is generally exempt from GST/HST, the builder of a new or “substantially renovated home” must charge and collect GST/HST when the home is sold. The CRA says it uses “various analytical techniques to identify builders who are not complying.”

Unreported capital gains on the sale of property

If you sell your home at a profit, in most cases you won’t have to pay any capital gains tax because of the principal residence exemption. If the home doesn’t qualify as a principal residence — a rental property or cottage, for example — then selling the property for proceeds greater than its cost generally results in a capital gain, half of which is taxable at your marginal tax rate.

If the owner of the Canadian real estate is a non-resident, then she is required to pay Canadian income tax on any profit and would generally not be eligible for the principal residence exemption. The tax rules require non-residents who sell Canadian property to notify the CRA within 10 days and to pay an amount to cover their estimated Canadian tax liability.