A client sold his rights to purchase a condo unit in 2024 after owning for 2 years before completion, resulting in a loss. Since his holding period exceeds 1 year, can he claim the loss (capital or business depending on his intention) on the tax return?
If this falls to business with intention, the loss is deemed to be nil
Since the property was sold after Jan 2023, the new rules apply.
What is important to determine is whether this is a flip property and if it is pursuat to the tax law: …a taxpayer’s loss from a business in respect of a flipped property is deemed to be nil.
One needs to see what was the intent of this property and the holding period if less than 1 year. If it was less than 1 year it would be deemed a flipped property.
There are exceptions to the rule as to why they sold. eg. death of someone, relocation, insolvency, marriage breakdown, disability, loss of employment of the taxpayer or spouse’s…etc.
Otherwise, there is not loss on the tax return allowed.
If you own more than 1 year, the flipping rule doesn’t apply so can’t we claim the loss (business/capital)??
Selling the right to purchase a condo is different than selling a condo. If it hasn’t been completed yet, you can’t be considered to have occupied it
Just looked up the law:
…a flipped property of a taxpayer means a property (other than a property, or a right to acquire property,…
Like any derivative product, this just a contract and would not be considered a flipped property.
The instrument would be a piece of paper like an equity or debenture. So it is an investment loss.
Not sure if there is exception in the ITA somewhere. But if it needs to be report as business income, then it may need to follow the flipping rule.
With an assignment sale, the buyer of a property assigns the legal rights and obligations of their contract of purchase and sale to a secondary buyer. You must report any profit from an assignment sale as business income in the tax year in which you assigned your rights.