HST

[worldjohn]

I was recently told by a municipality that they are adding/charging HST on tax sale properties. 
Are all municipalities going to do this?
anyway around this?

[link]

my understanding is that used residential housing is tax exempt as well as some "personal use property" as the municipallity has no personal use prop all sales other than used res housing  should be taxable they may argue that if the home is in bad shape (imagine that) that the value is in the land and charge the tax anyway

[cityhunter]

Its really unclear, most townships i spoke to said they would be charging HST for all props

[worldjohn]

The treasurer I spoke with said
HST must be paid unless
1 this is a resale property with a residential unit on it or
2 the purchaser is HST/GST  registrant and has given the municipality the required paperwork

So how does one become exempt and or a regristant?

[Dave2]

The treasurer I spoke with said
HST must be paid unless
1 this is a resale property with a residential unit on it or
2 the purchaser is HST/GST  registrant and has given the municipality the required paperwork

So how does one become exempt and or a regristant?

I hate to say this but I expect most of the regulars on this board will have to become  registrants because we will be deemed to be in the business of buying and selling land.  the problem is once you register they have their hooks in you for ever.  The advice I got was the third sale you ever make you must pay from then on. 

In my case a little more complicated because I already have a corporation with a GST number but traditionally have not run my property through it. 

[Frank]

The treasurer I spoke with said
HST must be paid unless
1 this is a resale property with a residential unit on it or
2 the purchaser is HST/GST  registrant and has given the municipality the required paperwork

So how does one become exempt and or a regristant?

You can get a GST number from Revenue Canada....however, as Dave (also) points out, you will rue the day you ever did that.  Revenue Canada will have its hooks on you and you will have to report to them your every move.  The future sale of the property will be looked at as a business venture and you will now have to pay full tax on the entire profit.  Off-side is that you can then write off costs such as searches, etc...against the profits, you don't have to be incorporated to do that...just in business...and they will deem you to be in business whether you like it or not.

[Dave2]

You can get a GST number from Revenue Canada....however, as Dave (also) points out, you will rue the day you ever did that.  Revenue Canada will have its hooks on you and you will have to report to them your every move.  The future sale of the property will be looked at as a business venture and you will now have to pay full tax on the entire profit.  Off-side is that you can then write off costs such as searches, etc...against the profits, you don't have to be incorporated to do that...just in business...and they will deem you to be in business whether you like it or not.

I am wondering given that a number of us we maybe facing the hastle of HST whether we like it or not that we should accept this fate and run our tax sale as a business.  At least we then can claim the input tax credits.  In my case more complex because my wife is also involved. 

The only saving grace I may have as a slum lot lord is that with low value of some of my properties I may fall under the small trader limit if I don't have much luck selling them. 

[Frank]

Originally intended to ensure that every yard sale, and children's lemonade stand doesn't have to do the paperwork regarding GST...the small trader limit is $30,000 per year, and is applicable on gross sales, not profit.  Once you cross that limit, you are stuck and there is no going back

You can get a GST number from Revenue Canada....however, as Dave (also) points out, you will rue the day you ever did that.  Revenue Canada will have its hooks on you and you will have to report to them your every move.  The future sale of the property will be looked at as a business venture and you will now have to pay full tax on the entire profit.  Off-side is that you can then write off costs such as searches, etc...against the profits, you don't have to be incorporated to do that...just in business...and they will deem you to be in business whether you like it or not.

I am wondering given that a number of us we maybe facing the hastle of HST whether we like it or not that we should accept this fate and run our tax sale as a business.  At least we then can claim the input tax credits.  In my case more complex because my wife is also involved. 

The only saving grace I may have as a slum lot lord is that with low value of some of my properties I may fall under the small trader limit if I don't have much luck selling them. 

[worldjohn]

So if I get a HST number I can avoid paying HST on tax sales buys which can be a significant savings
But the consensus  amongst the pros seems to be that its not worth it.
I guess a major drawback is when selling you will have to charge HST?
What specifically are the other negative ramifications?
Please elaborate on why I would "rue the day" I do this and what will they do when they "get their hooks" in me?
One thing I dont understand is  "future sale of the property will be looked at as a business venture and you will now have to pay full tax on the entire profit"  Last times I sold land I declared it a hobby business and the profit got added to my income and I paid tax on it.  Doesnt everyone have to pay taxes on the profits?  I think I should get an accountant at this point!
Also Frank are you saying if you keep gross sales under 30000 you dont have to get a hst # but if you go over it they will force you to get one?
Waiting to hear PFMs opinion on this as well
Thanks for the important tips!!

[Frank]

two words....capital gains....attracts half the tax, provided you can successfully characterize your sale as such...hire a good accountant.

[Dave2]

One thing I dont understand is  "future sale of the property will be looked at as a business venture and you will now have to pay full tax on the entire profit"  Last times I sold land I declared it a hobby business and the profit got added to my income and I paid tax on it.  Doesnt everyone have to pay taxes on the profits?  I think I should get an accountant at this point!
Also Frank are you saying if you keep gross sales under 30000 you dont have to get a hst # but if you go over it they will force you to get one?

The concern I have is that currently I have two GST/HST numbers and I may have to face the headache of getting a third.  To date I have paid GST on sale of property  based on a one off filing for sale of real property. My headache remains that because of all of the good advise here
its no longer a simple situation.

Question for Frank how many properties can you sell and have to declare profit as income not capital gain?

[Frank]

Answer is.....it depends.

Do you think principle residences are exempt.  Maybe...a few years ago, there was a fellow who built a house a year (I think for a dozen years or so)...claimed them all as principles.  Never actually lived in any of them.  When Rev. Can caught up to him, they not only said that these were not exempt, they deemed him to be in the business (he had no other gainful employ) of building houses and hit him for full taxes...plus fines of course. 

On the other hand, I know people who build a new house ever four or five years, and are employed elsewhere, they do live in these homes, and are successful (so far) in declaring them as tax exempt.  what they have effectively done is provided themselves with a second source of income by building sweat equipty into their personal homes (nothing wrong with that at all).

Question for Frank how many properties can you sell and have to declare profit as income not capital gain?

[Josh]

Frank is right.  Strictly speaking from a CRA point of view, even one sale provided that you originally bought the property for the purposes of selling it is considered business income and no longer falls under the capital gains rule.  For the guy who was building and selling one per year, he should have hired an accountant or a better accountant as you "must" live in the house for it to be considered a principle residence.  There are plenty of other guys out there who build a house every couple of years but live in one while they build the other.  This allows them to utilize the principle residence deduction.

[Dave2]

For HST, it is an entirely different story. Frank provided helpful information here in an earlier thread where he pointed out that it must be a personal use property to be HST exempt. So, both a vacation property and the main residence would qualify.

The problem remains where do we cross the line between "personal use" and "personal uses"
which means we are in the business of buying and selling land which is subject to HST.  By your logic greater then 2 sales are taxable.  An interesting question also over what time period.  
I have heard that the sales tax folks are thinking over a lifetime, not 2 a year.  

Of course the only sure and simpliest way of avoiding HST is to not sell anything.
Going to be some court cases coming.  

[Frank]

Dave..you appear to be confusing the issue of HST and the whole question of Income vs. Capital Gains.

Used residential stock is not subject to HST no matter how many you sell, or if it is a cottage, rental, a flip, or princple residence.  New residential stock is subject to HST, but with both Federal and Provincial rebates, the effective HST payable is reduced to 5.2% (in the case of a value that is below $350,000....the rebates diminish after that benchmark).    I'm not going to touch the subject of personal use, as I don't believe it has been defined....if you grow a garden on a building lot...is it personal use?  If you set up a tent once a year (or say you did), on a cottage lot is that personal use?

As to taxation on residential stock...if newly built, then you will likely be deemed to be a builder, and be subject to full taxation on your profits.   If it is where you live, then it will be exempt (assuming you have elected that location as your principle)....a cottage on the other hand, would likely be subject to capital gains (unless you have elected that to be your principle).    If you purchase a used house and fix it up to flip it, then it is likely going to be an income situation.....however, if you are in the habit of buying old stock and fixing them up, then renting them out, and you have an inventory of these types of properties...then likely your business is as a slum landlord.  If at some point in time, you decide to sell off a few of them for one reason or another, then you would likely be entitled to claim and pay capital gains on the profits.  I believe there is a new rule as well, that in the case of the these latter types of situations, you can even defer the capital gains, if you repurchase other stock to take the place of the ones you just sold within a specified time frame (six months rings a bell).

Still confused...hire a good accountant.     

For HST, it is an entirely different story. Frank provided helpful information here in an earlier thread where he pointed out that it must be a personal use property to be HST exempt. So, both a vacation property and the main residence would qualify.

The problem remains where do we cross the line between "personal use" and "personal uses"
which means we are in the business of buying and selling land which is subject to HST.  By your logic greater then 2 sales are taxable.  An interesting question also over what time period. 
I have heard that the sales tax folks are thinking over a lifetime, not 2 a year. 

Of course the only sure and simpliest way of avoiding HST is to not sell anything.
Going to be some court cases coming.