What is the rule on flipped property?

Since January 1, 2023, a new law aimed at combating "flipped properties" provides that profits from the resale of a residential property held for less than 365 days are fully taxed as business income, at a tax rate that can reach up to 53% for taxpayers in the highest tax bracket in Quebec. This means that you cannot benefit from either the 50% capital gains inclusion rate or the principal residence exemption.

This law was introduced to discourage the purchase of real estate with the intent to quickly resell it for profit, and to help stabilize the real estate market in Quebec.

However, the law provides exemptions when a flipped property results from unforeseen and uncontrollable circumstances beyond the owner's control, including but not limited to the following situations:

• Your death or the death of a related person;
• A related person becomes a member of your household (for example, the birth of a child);
• The breakdown of your marriage or common-law partnership, if you lived separately from your spouse or common-law partner for at least 90 days before the resale of the property;
• A threat to your personal safety or that of a related person (for example, domestic violence);
• You or a related person suffers from a disability or serious illness;
• You, your spouse or common-law partner starts working at a new location, and your new residence is at least 40 kilometers closer to that new workplace;
• The involuntary termination of your employment or that of your spouse or common-law partner.

Therefore, if you resell your property within 365 days of its purchase, we invite you to consult your tax advisor to fully understand the implications and avoid any unexpected tax consequences.

This article was written in collaboration with Me Natalie Semaan, notary at Blanchard Lupien notaries LLP.