flipping tax on pre-sale

The BC Home Flipping Tax is a 20 per cent tax on the gain from sale of a home within a one-year time horizon and a pro-rated tax on sales up to within a two-year period. The tax will apply to both properties and assignments of contracts and is in addition to any existing federal or provincial income taxes incurred from the sale of the property, including the federal anti-flipping tax. 

Exemptions will be available for certain life circumstances that might motivate the sale of a property within two years, including for added supply through the creation of rental accessory dwelling units.

Flipping applies also to a pre-sale contract.

- Signed on Day 1, have to wait 2 years to assign to avoid the penalty tax.

- If you hold a pre-sale contract for 5 years (we’ve seen some long delays with projects) and you close in year 5, you now directly own a real property and that resets the clock at 0. So you have to wait another 2 years before selling.  

Here is a scenario government expect the government to not think this through properly and catch lots of situations:

o Day 1 – Not married, no kids, sign a pre-sale for a 1 bedroom.
o Year 4 – Married with 2 kids.
o Year 5 – Close on property and sell right away.

If the measurement date for the change in family members is from the year 5 closing date (rather than Day 1), you’re screwed.