How does the flipping rule affect a residential property I sold in under a year?
Under Income Tax Act s. 12(1)(z.7) (in force since January 1, 2023), a residential property sold after being owned for less than 365 consecutive days is deemed flipped and the entire gain is taxed as fully-taxable business income – no capital-gain treatment, no principal-residence exemption. Life-event exceptions apply for death, disability, separation, and forced work relocation.
Scope. The rule applies to housing units in Canada that are or would be a taxpayer’s principal residence, and to rights to purchase such units (assignment sales). Ownership is measured in consecutive calendar days; 364 days = flipped, 365 = not flipped.
Consequences. (a) The gain is business income under s. 9, 100% taxable, not 50% capital-gain inclusion. (b) The principal-residence exemption is unavailable (s. 40(2)(b) refers to capital gains only). (c) Business-loss treatment for a sale below cost – can offset other business income.
Example: an Ontario buyer purchased a Mississauga condo on June 1, 2025 as principal residence. Job relocation offer prompted sale on March 1, 2026 (273 days ownership). Sale proceeds $850,000, cost $750,000, closing costs $30,000. Gain $70,000. If a life-event exception applies (bona fide employer-mandated relocation more than 40 km closer to new workplace under s. 12(1)(z.7)(iii)), capital-gain treatment restored and PRE potentially claimable. If no exception applies, $70,000 is 100% business income taxable at marginal rate up to 53.53% Ontario top rate – roughly $37,000 tax vs. potentially $0 with PRE.
Note: Assignment-sale flipping is covered from Assignment Sale Rules under ETA s. 192.1 (HST) and the flipping rule (ITA s. 12(1)(z.7)) simultaneously. Both apply; double-check exposure.
Source: canada.ca â Residential Property Flipping Rule
— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA
Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.