One time property flip (T2125?)

[ayluh70]

Hi, Before Covid 2 friends & I bought a pre-construction condo. Because of Covid there were long delays. Our occupancy date on the condo was Jan/23 and closing date Jun/23. We were so tired of all the issues we had with the builder, etc., that we put it up for sale right away and it sold in Aug/23.  I read the rule about having to fill out T2125 to report it as business income, but how? I need direction as I don't know what fields need to be populated, I don't see fields for property disposition, etc.  There is no business name or number so do I leave those fields blank? Is there any guidance on this that you can provide? It was a one time thing and I'm not going to be doing it again.  But still need to figure this out. 

Business Identification - Nothing here applies. I can put my own name in the first field. DO I have to select a NAICS? My share of the ownership was 37.5% - but does that apply on this page? 

Professional income and expenses - Again, nothing here seems to apply 

Vehicle Expenses - Nope

Home Office Expenses - Nope

Labour costs - Nope

Balance Sheet - ? maybe ? but don't think so...

Income Adjustment  - Nope

Business Partners - I was one of 3 co-owners but they are not like official business partners so no, but maybe I need to put their info here??

Capital Cost allowance for the business - doesn't look like?

DIEP agreement - Nope

 

and that's all there is, found nothing.  I hope someone can help me! thanks in advance

 

 

[Geo123]

 

Property Flipping with T2125

>>CRA Questions : (if lived in property as residence)

>>Complete Capital Gains section

>>Real estate

>>Enter Proceeds / Adjusted Cost Base  (ACB) / Expenses (if applicable)

 >>Complete T2125

>>Select T2125 – Business Income

>>Complete T225 – Business identification – note that many fields are not mandatary eg. Federal account number

>>Complete Income, expenses 
Note that Profits from property flipping are as previously calculated in the real estate capital gains section (Proceeds less ACB less expenses in disposition).  The capital gain is taxable at a 100% inclusion rate (not 50%)
   CCA is not applicable as you can not claim CCA in the year of disposition.

 
  

[ayluh70]

THANK YOU SO SO MUCH! Super Helpful!

Makes more sense now. This was the part I was not sure of:  "Note that Profits from property flipping are as previously calculated in the real estate capital gains section (Proceeds less ACB less expenses in disposition).  The capital gain is taxable at a 100% inclusion rate (not 50%)" but was coming to that conclusion that I had to fill out the actual property purchase/sale info there. I knew about the unfortunate 100%.. :(. We also didn't get our HST back either which was a huge hit. 

Just a couple of f/u questions: 

-I mentioned it was 3 of us, do I need to provide any details for the other 2 people? In your example you put "Sole Proprietorship", can I do that to? Or I have to say co-ownership and then maybe put their information on the "Business Partners" page? 

-for the Expenses incurred in making the disposition -  are taxes paid on legal fees and commissions reportable in the total?  and is just the fees we paid on selling or can I include the legal fees on buying too? 

(I guess I can't include the HST we paid, ha ha .. )

I appreciate the help more than you know.. thanks again 

[Geo123]

Hello,

Glad to hear it, you are welcome.

>>For the business partners (they should do the same on their respective tax returns)

 

>> taxes paid on legal fees and commissions - Yes, all expenses directly related to the transaction : legal, marketing and brokerage. You should check with the CRA if the acquisition costs are included.

[ayluh70]

Hi again,

I hope its ok that I do not have my partners' SIN numbers. 

Also there is a question at the bottom of "Personal Use Property" page that asks: Designation of the property as a principal residence?

It wasn't but since we didn't actually rent it out, do I say yes here? does it make a difference to something? 

Edit: one more, sorry.. I just want to get this right the first time around.  The new question about "profits from property flipping" - do I just put my own share of profit there or overall?

thanks

Edited April 8 by ayluh70
added one more question

[Geo123]

Hello ayluh70

Designation of the property as a principal residence does not make a difference.  Profits from property flipping is the total, which is then prorated to the partners you added in the T2125 section.

 

[ayluh70]

I know, me again. I realized I made a mistake in the expenses incurred in the disposition. When I fixed it, it made no difference to what I owe. Do expenses not factor into the calculation then? 

[Geo123]

Hello ayluh70,

Yes, expenses incurred in making the disposition should be included.

1,000,000.00

900,000.00

5,000.00

--------

95,000.00

----------

>>T2125