On December 15, 2022, the federal government passed the Anti-Flipping Rule, which came into effect on January 1, 2023.

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What is Anti-Flipping?

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In simple terms, flipping refers to the practice of buying and selling properties for quick profits. Typically, the profit from selling a property is treated as capital gains, where only 50% (or 67% for gains exceeding $250,000) of the gain is taxable.

However, to curb short-term investments and prevent excessive property price increases, the government has introduced a rule where profits from selling properties held for less than 365 days will be classified as business income, making 100% of the profit taxable.

This rule applies not only to investment properties but also to principal residences. If the sale of a principal residence is deemed property flipping by the government, the principal residence exemption will no longer apply.

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Exceptions to the Rule

If you meet any of the following conditions, the sale will not be subject to the Anti-Flipping Rule:

• Death of the taxpayer or a related family member.

• Addition of a new family member (e.g., birth or adoption of a child, or an elderly family member moving in for care).

• Divorce or separation.

• Personal or family safety concerns due to ownership of the property.

• Illness or disability.

• Relocation for employment.

• Job loss or unemployment.

• Bankruptcy or inability to meet financial obligations.

• Destruction or expropriation of the property.

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