House Flipping and CRA Business Income Rules

Introduction
Understanding house flipping and CRA business income rules is essential for real estate investors, renovators, contractors, realtors, and homeowners who buy and sell properties frequently. Many taxpayers mistakenly assume that selling a property automatically qualifies for the principal residence exemption or capital gains treatment. In reality, CRA often considers flipping activity a business, meaning 100% of the profit is taxable as business income and the principal residence exemption does not apply. Revenu Québec follows similarly strict guidelines, especially for repeated sales. This guide explains everything you need to know about house flipping and CRA business income rules—and how to avoid major reassessments.

Legal and Regulatory Framework
House flipping and CRA business income rules are governed by:

• the Income Tax Act
• CRA’s real estate audit program
• the Excise Tax Act (GST/HST on new homes and renovations)
• Québec’s Taxation Act
• case law defining “adventure in the nature of trade”

CRA assesses real estate transactions based on:

• intent
• conduct
• frequency of transactions
• level of involvement
• business characteristics

If CRA determines you are flipping properties, profits are business income, not capital gains.

1. When Is a House Flip Considered Business Income?

CRA uses several tests to determine if a property sale is business income.
You may be considered a flipper if:

• you bought the property to renovate and sell for profit
• you frequently buy and sell properties
• you sold a property shortly after purchasing it
• you carried out significant renovations
• you listed the property immediately after work was done
• you treated real estate as an income source
• you are involved in construction/real estate fields
• your intention was profit—not long-term use

If these conditions apply, CRA will tax 100% of the gain.

Capital Gains vs Business Income

• Capital gains → only 50% taxable
• Business income → 100% taxable
• Principal residence exemption → 0% taxable (only if eligible)

House flipping and CRA business income rules exist to prevent misusing the principal residence exemption.

2. Adventure in the Nature of Trade

This legal concept covers:

• one-time transactions
• speculative purchases
• resale properties that show intention of profit

Even a single sale may be considered business income if the taxpayer’s intention was to flip.

Examples:

• buy → renovate → sell
• purchase a condo during construction and assign before closing
• buy pre-construction with the intention of reselling

CRA treats these as business activities.

3. Principal Residence Exemption Rules

The principal residence exemption (PRE) only applies if:

• you ordinarily lived in the property
• it was not purchased primarily to flip
• you can prove occupancy through documentation
• the property was not used for business purposes
• you are not a frequent seller

CRA aggressively audits PRE claims for flipping.

Documents CRA Requests:

• utility bills
• mortgage statements
• school registrations
• insurance records
• driver’s licence address
• moving receipts
• extended occupancy evidence

If evidence is weak, PRE is denied.

4. GST/HST and QST Implications for Flippers

Under house flipping and CRA business income rules:

• new or substantially renovated homes require GST/HST
• Québec applies separate QST rules
• GST/HST must be charged on newly built or heavily renovated homes
• builders may face self-supply rules
• assignment sales may trigger GST/HST
• flippers must often register for GST/HST

Failure to apply GST/HST correctly results in major assessments.

5. Assignment Sales

Assignment sales are often flagged as flipping.

Rules include:

• profits on assignments are fully taxable as business income
• GST/HST may apply to assignment profit
• pre-construction condos flipped before occupancy are high audit risks

CRA assumes most assignments are speculative unless proven otherwise.

6. Renovations and “Substantial Renovation” Test

If you renovate more than 90% of the interior, the home is considered:

• new construction for GST/HST
• subject to builder rules
• ineligible for the principal residence exemption if used for flipping

Flippers must be careful how renovations are classified.

7. Québec-Specific Real Estate Rules

Revenu Québec is even more aggressive than CRA in real estate audits.
Triggers include:

• buying and selling more than one property within 3–5 years
• repeated condo assignments
• mixed-use buildings
• Airbnb conversions
• attempts to claim PRE for rentals

Québec also requires QST compliance for new housing and renovations.

8. Common Audit Triggers for Flippers

CRA flags returns for:

• multiple real estate sales
• sales within 1 year of purchase
• claiming PRE on several properties
• assignment sales
• renovation activity before sale
• lack of occupancy documentation
• profession in construction or real estate
• mismatched income vs lifestyle
• unreported GST/HST obligations

Understanding house flipping and CRA business income rules is essential to avoid these triggers.

Mackisen Strategy

Mackisen CPA offers comprehensive real estate tax support:

• determining if a transaction is capital or business income
• proving principal residence exemption eligibility
• reconstructing occupancy evidence
• calculating GST/HST or QST obligations
• assisting with assignment sale filings
• handling CRA and ARQ real estate audits
• preparing documentation for “adventure in the nature of trade” disputes
• filing objections and appeals for denied PRE
• advising flippers on tax structures and entity planning

We protect real estate investors from costly reassessments and penalties.

Real Client Experience

Examples of house flipping and CRA business income rules issues Mackisen resolved:

• A client sold 3 homes in 4 years and claimed the PRE. CRA denied all claims. Mackisen appealed and recovered 2 exemptions.
• A Québec investor performed extensive renovations and sold within months. ARQ treated it as business income. We corrected GST/QST filings and reduced tax owed.
• A condo assignment seller faced GST reassessment. Mackisen recalculated GST on assignment profit and minimized penalties.
• A taxpayer with weak occupancy proof lost their PRE. We reconstructed evidence through insurance, bills and affidavits.
• A builder used their corporation incorrectly for flipping. We restructured the entity and corrected filings.

Common Questions

• Is selling one flipped home considered business income?
Yes—if the intention was profit.

• Does living in the property guarantee PRE?
No—you must prove it was your real home, not a staged flip.

• Do flippers need to charge GST/HST?
Often yes—especially if the home is new or substantially renovated.

• Are assignment sales capital gains?
Usually no—treated as business income.

• Can I claim renovation costs?
Yes—but capital vs current classification matters.

• Does Québec audit flippers more aggressively?
Yes—ARQ is stricter than CRA.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps real estate investors, flippers and homeowners stay fully compliant with house flipping and CRA business income rules. Whether you're buying, renovating, assigning, or selling properties, our expert team provides accurate tax planning, audit defense, principal residence exemption support, GST/HST/QST compliance and full dispute resolution.

69. GST/HST New Housing Rebate Explained

Introduction
Understanding the GST/HST New Housing Rebate explained is essential for homebuyers, builders, investors, families, and landlords purchasing newly built homes, pre-construction properties, substantially renovated dwellings, or new residential rental buildings. The GST/HST New Housing Rebate helps reduce the tax burden of buying or building a new home. However, eligibility rules are strict, documentation must be precise, and CRA aggressively audits rebate claims—often demanding repayment if rules are misunderstood. Québec adds another layer of complexity through its separate QST New Housing Rebate. This guide explains everything about the GST/HST New Housing Rebate explained, eligibility conditions, common mistakes, and how to protect your rebate.

Legal and Regulatory Framework
The GST/HST New Housing Rebate explained is governed by:

• the Excise Tax Act
• CRA GST/HST Memoranda
• Form GST190 (New Housing Rebate)
• Form GST191 (Self-Build Rebate)
• Form GST524 (Rental Rebate)
• Québec Taxation Act (QST rebate)
• Revenu Québec rebate regulations
• new construction and substantial renovation rules

A new home may qualify for:

• GST/HST New Housing Rebate (for owner-occupied homes)
• New Residential Rental Property Rebate (NRRPR) (for landlords)
• QST New Housing Rebate (Québec-only)

Understanding the differences is essential for applying correctly.

1. When Does the GST/HST New Housing Rebate Apply?

The rebate is available when you:

• buy a newly built home
• buy a substantially renovated home
• build a home yourself (self-build)
• buy a pre-construction condo
• convert a non-residential building into a residence
• add a residential addition that qualifies as new

The rebate applies to the GST portion of GST/HST.
HST provinces offer partial provincial rebates.

2. Eligibility Requirements (Owner-Occupied Rebate)

To qualify for the GST/HST New Housing Rebate explained:

A. You Must Intend to Use the Home as Your Primary Place of Residence

This includes:

• you
• your spouse
• your children
• a relative who qualifies

If your intent is not to live in the home, CRA will deny the rebate.

B. You Must Actually Occupy the Home

Proof of occupancy may include:

• driver’s licence address
• utility bills
• insurance policies
• school registrations
• change-of-address confirmations

Failure to provide evidence is the #1 reason rebates are denied.

C. The Home Must Be New or Substantially Renovated

Substantial renovation = 90% or more of the interior replaced.

D. Property Value Limits

Federal GST rebate phases out between:

• $350,000 and $450,000 (older rules; varies depending on province)
• HST provinces (Ontario, Nova Scotia, etc.) have their own rebate limits

CRA checks purchase agreements to verify the correct price threshold.

3. The Self-Build Rebate (GST191)

You may qualify if you:

• build a home yourself
• hire contractors to build it
• substantially renovate a property
• convert a commercial building into residential use

Self-builders must keep:

• invoices
• contracts
• construction logs
• blueprints
• GST paid on materials and labor

CRA audits self-build claims aggressively.

4. New Residential Rental Property Rebate (GST524)

Landlords qualify if they:

• purchase a new property to rent out long-term (not Airbnb)
• intend to rent for periods of 12 months or more
• have a signed lease or rental agreement
• are not personally occupying the unit

NRRPR is widely audited because:

• investors often apply incorrectly
• some landlords mistakenly apply for homeowner rebates
• Airbnb units do NOT qualify

A lease must be provided at application.

5. Québec-Specific Rebate Rules (QST Rebate)

Québec has its own rebate programs, including:

• QST New Housing Rebate
• QST Rebate for New Rental Units

Key differences:

• filing is with Revenu Québec, not CRA
• form VD-370.67 (or its updated version) is used
• QST rebates may apply even if GST rebates do not
• eligibility thresholds differ

Québec is far more aggressive with real estate rebate audits.

6. Common Mistakes That Cause CRA to Deny Rebates

Mistakes include:

• failing to live in the property
• claiming the rebate for a flip
• applying for the wrong rebate type
• insufficient proof of occupancy
• renting the property instead of moving in
• claiming CCA in a home you occupy
• incorrect classification of renovation as “substantial”
• misreporting purchase agreements
• errors in the GST190 or GST524 forms
• using the home as an Airbnb

CRA and ARQ request extensive documentation to verify claims.

7. Documentation Required

Keep:

• purchase agreement
• statement of adjustments
• proof of occupancy
• invoices for building materials
• construction contracts
• lease agreements (for rental rebate)
• municipal occupancy certificates
• utility bills
• GST/QST invoices

These must be retained for six years, sometimes longer.

8. Audit Triggers for Housing Rebates

CRA frequently audits:

• pre-construction condos
• assignment sales
• recent immigrants claiming PRE and rebates
• buyers who never moved in
• rental properties reported incorrectly
• homes sold shortly after purchase
• self-builds with missing invoices
• Airbnb conversions
• flipped properties
• multiple rebate claims

Understanding the GST/HST New Housing Rebate explained helps avoid high audit risk.

Mackisen Strategy

Mackisen CPA provides expert guidance for rebate applications:

• determining the correct rebate (owner vs rental vs QST)
• reviewing purchase agreements and builder documents
• preparing GST190, GST191 and GST524 accurately
• reconstructing missing documentation
• proving occupancy or rental intent
• handling CRA and ARQ rebate audits
• filing objections for denied rebates
• advising on principal residence exemption integration
• ensuring clients claim the maximum rebate allowed

We protect homebuyers and investors from costly errors and audits.

Real Client Experience

Examples from Mackisen clients:

• A buyer claimed the homeowner rebate but rented the property immediately. CRA denied it. Mackisen filed the rental rebate instead and recovered most of the refund.
• A Québec investor had their QST rebate refused due to incomplete invoices. We rebuilt documentation and refiled successfully.
• A self-builder lost receipts during construction. Mackisen reconstructed GST costs and obtained approval.
• A condo purchaser flipped the unit before occupancy. CRA reassessed GST. Mackisen minimized penalties and corrected filings.
• A family failed to prove occupancy. We prepared affidavits and supporting evidence, winning the objection.

Common Questions

• Do I qualify if I didn’t move in?
No—you must occupy the home for homeowner rebates.

• Can investors claim the rebate?
Yes—through the rental rebate (NRRPR), not homeowner rebate.

• Do assignment sales qualify?
Usually no—most assignments do not meet occupancy requirements.

• How long must I live in the home?
Long enough to prove it was truly your primary residence.

• Does Québec have separate rebates?
Yes—QST rebates require separate forms and filings.

• Can I claim CCA on a new home I live in?
No—this affects the principal residence exemption.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps homeowners, investors and builders secure housing rebates while staying compliant. Whether you’re applying for the GST/HST New Housing Rebate explained, filing a rental rebate, building a home, or facing a rebate audit, our expert team ensures complete accuracy, full documentation and strong representation against CRA or Revenu Québec.