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The house tax

Monday, February 13, 2017 16:42
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(Before It's News)

We know the T2 gang, spending billions they do not have, are likely to be gunning for small business with the Doctor Tax. Speculation is mounting rapidly that Ottawa is about to increase capital gains taxes, giving your mutual fund an unwelcome kick and making that investment condo look even worse. Now we have chatter that the dividend tax credit could be a target, whacking seniors who replaced do-nothing GICs with divvy-producing equities for income.

But, alas, it may get worse. Is Justin Trudeau setting the scene for a House Tax?

Actually, it’s already been set. And you read about it first on this pathetic blog. Remember almost six months ago when Wild Bill Morneau brought in a series of measures to (we were told) chill the real estate market? One that slipped beneath the radar was the need for all taxpayers to register their real estate transactions with the federal government in order to claim tax-free capital gains. We were told at the time this was to spank foreign buyers trying to use the dodge.

But, really? Here is what we said at the time:

“Buried in the announcement, the background paper, the technical paper and then deep into the CRA website are significant changes to how your Big Brother government will now be policing your family home. Under the guise of whacking foreign buyers – a tiny percentage of whom have been claiming the ‘principal residence’ exemption to avoid capital gains tax – the T2 gang have given the CRA the ability to whack you.

It’s a first in Canadian history. You’ll have to prove your home is your home. If you don’t, the money made on its appreciation will be fully taxable. The suggestion that homeowners selling or buying their personal residence will be a required to report it on income tax forms sounds innocent, but it’s anything but.  Twenty years from now as pressure is put on funding government pensions, having a record of net wealth tied up in the family home could place unexpected challenges upon those looking to retire.

Says housing analyst Ross Kay: “Anyone who believes today’s suggestion that Canadians are now required to give the government the details on selling the family home is not thinking.  The government is using the illegal actions of NON-Canadians as an excuse to monitor Canadians’ retirement finances – not something this country should stand for.”

Here are the facts:

  • Taxpayers must report the sale of the family home if you’re claiming an exemption from capital gains tax (in the past that exemption was automatic. If you don’t comply, no exemption.
  • The CRA will have authority at assess capital gains tax on real estate that is not reported on the tax return for the year in which it is sold.
  • Ottawa will work with provincial governments (which maintain land registry operations) to ensure that all residential real estate transactions are recorded and taxed as required.
  • The tax return, starting next April, will require details on the date a property was acquired, the proceeds of disposition and a description of the property. To qualify for a capital gains tax exemption, you must complete and file a separate Schedule. The full exemption may not be granted, depending on the details provided.
  • If you sell your home but forget to include this information on your return, the CRA will not allow the proceeds to be tax-free. In that case you must ask the CRA to amend the return. This amendment will be granted “in certain circumstances” but may also come with a penalty equal to the lesser of $8,000 or $100 per month from the sale date to the request date.
  • If you have a suite in your home, then sell it, the selling price must be split and reported. Part of it will qualify to the tax exemption and part will not. In markets with elephantine gains in home prices, this could be quite the bombshell.

Effective today your personal residence is a fully-taxable commodity unless you take specific steps to avoid it. By taking those steps, you’re also providing the government with information never previously gathered. Will Canadians accept this? Bill Morneau and his boss think so. After all, they wrapped it in anti-Chinese emotion. How brilliant was that?”

Well, the form is now out, as a page in the T1 tax return. Here it is:

If you comply, there’s a permanent record of what an address sold for, and how much you personally received. Valuable information for any government establishing a property registry in advance of applying a potential tax on real estate, or wanting to track what windfall gain an individual may have made. If you don’t fill it out, you’re pooched – taxed on the entire profit.

Some people believe, with so much of Canadians’ net worth having been shifted from financial assets into real estate that no government can afford not to tax it. Others are musing people might be granted a certain lifetime limit for tax-free real estate gains, then be nailed for amounts in excess. After all, it is fair wage slaves are sucked dry with levies on employment income, while a house in Vancouver or Toronto can double in value, giving millions, tax-free?

Of course not. And this government’s all about fairness, right?



Source: http://www.greaterfool.ca/2017/02/13/the-house-tax/

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