Budget 2022 introduces a new deeming rule to ensure profits from flipping residential real estate are always subject to full taxation. Sections 12(2) and 12(3).

Specifically, profits arising from dispositions of residential property (including a rental property and assignment sales) that was owned for less than 12 months would be deemed to be business income. The 12-month holding period for the Residential Property Flipping Rule will reset once the property is owned by the tax payer who entered into a purchase and sale agreement. Ensure the Residential Property Flipping Rule cannot be bypassed when selling a constructed property simply because a tax payer held the rights to purchase the property before it was constructed.

Certain life events maybe considered as exclusions:

• Death of a taxpayer
• New addition (birth of a child or adoption) to the taxpayer’s household
• Relationship break-down (separation or divorce)
• Threat to personal safety
• Disability or illness
• Change in employment (new home must be at least 40 KMs closer to the new work place)

Where the new deeming rule applies, the Principal Residence Exemption would not be available. The measure would apply in respect of residential properties sold on or after January 1, 2023.