Sales of Principal Residences Must be Reported (New 2016)
(Claim it or Lose it?)
The federal government has proposed changes to both mortgage qualification rules and the reporting of the disposition of principal residences under the Income Tax Act.
Up until now, a taxpayer did not have to report on the sale of a principal residence, if it was fully exempt. If the disposition was only partially exempt, for example, the taxpayer may have had another property which qualified for the exemption during certain years, then there were disclosures which were required.
Now, all dispositions will need to be set forth the tax returns for 2016 and following years.
Failure to report will enable the Canada Revenue Agency (CRA) to impose a penalty of $100.00 per month for late reporting to a maximum of $8,000.00.
That’s simply for late reporting. The CRA would have to agree to permit the late filing. If the matter were left for 10 years and not claimed, then the CRA loses its discretion to accept a late report. But, that will be 2027, so there could be other rules in play by that time.
There are roughly 100,000 transactions of residential homes each year in Toronto. Most would qualify as exempt. From 1972 to 2015, no reporting was required for fully exempt properties. Now, they all must be reported in the taxpayer’s income tax returns for the years 2016 and following.
If you are a real estate agent, you should inform your Sellers.
If you acted on the sale of a property and the file is still open, then you should inform your Sellers.
An open question, is your liability for 2016 concerning closed files. One view is simply: “it’s in, it’s done, it’s finished…”. And the other view would be: “… for all that commission, I thought my agent would have told me…”. At issue, is the question of when the agency relationship came or comes to an end.
Brian Madigan LL.B. Broker