Taxman probes Toronto condo flipping

Canada Revenue Agency is analyzing 2,810 transactions involving cases of preconstruction condominium flipping in Toronto to determine whether audits need to be carried out to find tax evaders.

In the Toronto area in particular, audit work has increased substantially on what are called “assignment sales” or “shadow flipping” in which a condo is purchased from a developer and sold to another buyer before the unit is completed, the federal government agency said Tuesday.

“The profits from flipping real estate are generally considered to be fully taxable as business income,” said CRA spokesperson Zoltan Csepregi in an emailed statement. “The facts of each case determine whether such profits should be reported as business income or as a capital gain.”

Real estate deals in the Greater Toronto Area and Vancouver have been the subject of greater scrutiny, including audits, the agency said.

“Over the years, CRA has made significant progress in using intelligence gathered through a variety of tools at its disposal as well as using experienced audit and investigations teams,” noted Csepregi.

“New technologies and faster computers are helping us to more effectively access, integrate, and analyze this data, resulting in better business intelligence.”

The CRA’s interest in tax avoidance in real estate is likely related to affordability issues in Toronto and Vancouver over the last couple of years, said Tsur Somerville, a senior fellow at the UBC Centre of Urban Economics and Real Estate.

The average selling price of a condo in the Toronto area is $510,206. The benchmark price of an apartment in Greater Vancouver last month was $635,800.