Hello,
I have a client who is a first time home buyer and booked preconstruction townhouse on March 2021 in Cambridge, ON, closing of the townhome was supposed to be in October 2022. At that time, he was single and studying in University of Toronto and lived in Brampton. He got job in Kitchener in September 2022, but he lived in Brampton because builder delayed the closing of the house. The House closing date was moved by builder to August 28, 2024. But he got married in Jan 7, 2023, and spouse works in Mississauga. He also changed his job in September 2023 and is currently working in Mississauga. My question is if he sells his house within 365 days, will it be taxed as business income, or can he be eligible for one of the exceptions which is got married and job change. Your comments will really help me guide my client better. Thanks.
Seems to me that it would qualify as an exemption for the following reasons:
- I presume he had no other primary home and was renting.
- This was always intended to be his primary residence. There is no original intent to flip the property.
- It was delayed significantly by the builder, which was beyond his control, otherwise he would have lived in the home.
- He is selling it because of his marriage and new job (change in life circumstances, not an intent to flip).
You will have to make sure these details are spelled out very clearly!
I would include the original sales contract with the expected October 2022 closing data, any documents related to the delays, and the title to confirm the transfer date. Add the marriage certificate and a letter from the new employer confirming the start date.
If you’re reporting it on the T2091 as having been acquired and sold within the same year, CRA is supposed to be watching for those - since the new legislation says ANY sale within one year will be considered business income.
If they follow what the law-makers intended (i.e. if the CRA computer systems have been programmed to do it automatically), I would expect them to reject the T2091, and assess the sale as business income. Then you (or your client) have to file a NOO to get it looked at in more detail. Then, as noted by @johanus and @helga_spence - you (or your client) should have no trouble proving to CRA that it was a legitimate PRE.
Just be aware of the extra work involved.
Also, remember this is new legislation, and we don’t have much evidence to say with any certainty what CRA “usually does” in such cases.
Thank you @Nezzer . Can you also provide your comments on what will happen to HST rebate on new houses. Can my client claim HST rebate of $24,000 by selling within 365 days.
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Thank you @johanus . Can you also provide your comments on what will happen to HST rebate on new houses. Can my client claim HST rebate of $24,000 by selling within 365 days.
What would stop him? Arthritis in his hands? Is he mute, so that he can’t dictate his wishes to someone who would fill out the paperwork? 
More to the point, WHEN he files the rebate claim, will CRA approve it? I don’t know. I haven’t had enough first hand experience with those claims to risk a guess. I know that CRA audits almost every single one of them, so be prepared to provide all appropriate supporting documents.
I’m in Alberta, so don’t deal with HST. I presume what Nezzer said is appropriate.