Every real estate (Sale and Purchase) transaction in Canada is recorded in the land registrar office. The CRA has access to all the information regarding properties sold and bought in Canada. So, if you sell a property in Canada (even your principal residence) and do not report the sale in your tax return, there is a 95% chance CRA will contact you and will be charged with huge penalties and interest for not reporting the sale. You can claim a Principal Residence Exemption (PRE) when you sell your principal residence, but reporting is a must.
For example, many people through the advice of their friends or sometimes their real estate agents buy a condo, claim the HST rebate which is a huge savings, keep it for 6-8 months and then eventually sell it without reporting it on your tax return thinking they don’t have to pay tax on it. Down the road it could be 2 or 3 years, they would get a letter from CRA asking for documents and eventually end up including what they think should be a capital gain in to their tax returns as business income. Again, penalties and interest apply.
The CRA has set up a special department for dealing with real estate sales transactions. So, before you sell your condo or your house, please contact us so we can guide you how it could impact you. We have helped many taxpayers under the same circumstances and prepared the necessary documents to provide the CRA with relevant information.