The Federal Budget issued on April 7, 2022 proposes that all profits from the sale of residential properties held for less than 12 months would be considered business income. This rule would apply to all properties sold on or after January 1, 2023, with certain exceptions such as death, disability and divorce.

Currently, the law does not provide for absolute clarity in determining whether income on the sale of a residential property is from business or from capital gains. This is an important distinction, as a home which is sold on account of business income, will not qualify for the principal residence exemption, and any gain will be taxable. The principal residence exemption excludes from taxation all or substantially all of the taxable gain resulting from the sale of a home the taxpayer, or a related individual, ordinarily occupies.

Accordingly, taxpayers engaging in “house flipping” as a business, should be claiming business income on the sale of their units.

While the proposed 12-month Anti-flipping Tax sounds like a bright-line, as between capital gain / principal residence treatment and business income, that may not prove to be the case. Specifically, no draft legislation has yet come from the Federal government on this issue.  Moreover, the 2022 Budget announcement anticipates a number of exemptions, which may simply change one set of factual determinations, for another.  In that regard, the Federal government has indicated the 12-month rule described above will have a list of exemption, which would eliminate the application of the 12-month rule.

By way of example, a taxpayer selling a home to move closer to an ill relative, will support the proposition of having a gain treated as capital, rather than business income.

Additionally, the Federal government indicated that the 12-month rule will apply to those who “held” a property for less than 12 months. It is unclear, how the Federal government will define “held”. Presumably, this will be the period from the close of the sale to purchase the property, through to the close of the sale to sell the property. The effect of this, may actually be, that home owners in fact, hold onto their homes for longer than they would have otherwise and therefore do little to free up homes.

Given that no draft legislation has yet been produced, it is too early to start planning for the application of the 12-month Federal anti-flipping tax.  Having said that, we shall provide further updates, as this issue develops, and will provide commentary, once the draft legislation is released.

If you have any questions or would like advice related to the matters set out in this post, or if you have questions in relation to matters of real estate, business law, intellectual property and trust and estate matters, please contact us at 604-688-4900 or by email to Paul Barbeau at or to Morgan Best at