Selling a property before completion has multiple tax treatments. An assignment sale may be viewed as a capital transaction or a business venture. The distinction is important as the difference in the tax implications of the two treatments is substantial; a capital gain usually resulting in a lower tax bill, as taxable gains are 50% of the actual capital gain.
Whether the CRA views an assignment sale as a capital or business transaction depends on the buyers intention at the time of purchase. It is therefore vital to establish, document and communicate your intentions for a property at the time of purchase.
Intentions at the time of purchasing property also determine whether GST/ HST at 13% is payable on the gain, and who pays that GST/ HST; the builder, the first buyer; or the final buyer.
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The content of this article is intended to provide a general guide on the subject matter. It is not intended to replace professional advice. Specialist advice should be sought about your specific circumstances.