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Capital Gains vs Business Income

Real estate investment is common. However, it is important to understand the difference between Capital gains and business income to determine if you will be taxed.

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The Difference Between Capital Gains Tax and Business Income in Canada


Real estate investment is common. However, it is important to understand that you may be taxed differently depending on the nature of your investment.

In most cases, you will pay capital gains tax on real estate profits if you sold a property that is not your primary residence. This would cover situations where you own a property, live in it for a while or rent it out to generate income, then sell it.

Note that, starting with the 2016 tax year, you are required to list all real estate sales, even if the sale would qualify for the primary residence exemption. The CRA wants to track real estate sales more closely.

If you “flip” a property, meaning you buy a house or condo with the intent of selling it for a profit, the income you generate is considered business income. This is a major difference.

  • In a capital gain, you pay tax on 50% of the profit
  • If a real estate sale is considered business income, you would need to pay tax on 100% of the profits
  • The CRA determines whether profits from a real estate transaction are considered capital gains or business income based on the facts of each transaction


The CRA, Capital Gains, and Business Income


The CRA tries to determine your intent when analyzing a real estate sale. If the CRA believes that you purchased a property with the intent of “flipping it” for a profit, the agency will demand that you pay tax on 100% of the profits. You will then need to provide proof that this was not the case. As you can imagine, this can be quite difficult to do. You will want to have experienced tax professionals on your side to have the best chance of success.


Farber Tax Solutions Resolves Tax Problems


Farber Tax Solutions is made up of ex-CRA, accounting, and legal professionals. This allows us to offer complete tax solutions under one roof. Not only do we have a keen insight and understanding of CRA processes and policies, but we also have the legal and accounting knowledge to assist you and resolve your tax problems. We have a proven track record of successfully negotiating with the CRA and tirelessly work to produce the best possible results for our clients.


Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:

  • 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
  • 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
  • 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.


Our Expert Team

When you work with Farber Tax Solutions, you benefit from:

  • Our dedicated team of ex-CRA, legal, and accounting professionals who will review your situation and determine the best course of action
  • Our experience in successfully negotiating with the CRA to resolve tax problems
  • A free consultation with our tax experts to discuss your situation.

Trust Farber Tax Solutions

We have a proven history of resolving tax issues. If the CRA is stating that you have not correctly declared business income or paid capital gains tax, or if the profits of a real estate sale were not properly declared and classified, we can help. Trust our professionals to assist you with your tax problem. Contact us today to arrange a free consultation.