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UBC Real Estate Licensing Exam > Chapter 5.2: Taxes On Real Property > Flashcards

Chapter 5.2: Taxes On Real Property Flashcards

1
Q

What does GST stand for!

A

Goods and services tax

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2
Q

What is GST?

A

Taxes on the purchase or sale of real property

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3
Q

GST is a ____________ tax

A

Federal

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4
Q

Compared to income tax, GST has a relatively _______________ of taxation

A

Low rate

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5
Q

GST is imposed under the _________________

A

Excise Tax Act (ETA)

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6
Q

GST applies to ______ transactions, unless it is expressly listed as an exemption in the Excise Tax Act

A

All

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7
Q

If you owe GST it is a _____________ and is payable immediately - pay now, dispute late

A

debt to CRA

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8
Q

The ____________ has the obligation to pay the GST

A

Buyer!

The recipient

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9
Q

GST generally does not apply to the amount of the ___________ until the closing date at which time the full amount of the sale price becomes taxable

A

Deposit

Including the deposit (also taxable)

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10
Q

No GST applies to _______________ for prepayments

A

Reimbursements

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11
Q

Only amounts on the statement of adjustments that are legal components of the purchase price are subject to _______

A

GST

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12
Q

The _________ collects the GST as an agent for the ____________. It is deemed to be held in trust

A

Seller
government

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13
Q

When the __________ collects GST from the __________, it is deemed to be held in trust for the ______________ until it is remitted

A

Seller

Buyer

Government

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14
Q

Where a seller fails to collect GST from the buyer, the seller becomes ______________ to the government for the amount of the tax

A

Equally liable

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15
Q

The seller has the right to pursue the buyer for what?

A

The uncollected GST they forget to collect

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16
Q

To dispute a GST claim, you have _________ from the date of assessment to file an objection first with the CRA

A

90 days

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17
Q

The 90 day CRA claim can later be appealed to what 3 parties?

A
  • tax court of Canada
  • federal court of appeal
  • Supreme Court of Canada
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18
Q

What is the self supply rule?

A

Means that a builder or developer must pay GST/HST on the fair market value of a newly built or substantially renovated property if they keep it for personal use or rental instead of selling it.

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19
Q

____________________: GST deduction a person can claim on their GST return for the amount of GST paid by that person on the acquisition of property or services

A

Input tax credit

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20
Q

2 specifics with input tax credit (business gst removal)

A

Commercial real property transaction

Buyer is responsible for reporting the GST

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21
Q

________: a form of tax recovery that allows non-businesses to recover GST paid with respect to certain transactions

A

Rebates

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22
Q

Individuals entitled to the rebate are generally required to file a ________________

A

Rebate application form

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23
Q

Rebates must be filed with the CRA within ___________ of the purchase

A

2 years

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24
Q

The CRA has the power to audit and then assess a buyer or seller in respect of a _____________

A

GST amount

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25
Q

To dispute a _________, you have 90 days from the date of the assessment to file an objection with the CRA, then tax court, then federal court of appeal, then Supreme Court of Canada

A

Rebate

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26
Q

What is included in the title, residential complex

A
  • detached homes
  • condominium unit (strata)
  • land (that is reasonably necessary for use and enjoyment of complex as a place of residence)

Seller may be required to collect the GST

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27
Q

GST is excluded in what three items (related to real estate)

A

1) hotels - subject to GST
2) short term rental (AirBNB) - subject to GST
3) assignment fees - subject to GST

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28
Q

PTT stands for what?

A

Property transfer tax

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29
Q

What is property transfer tax

A

tax paid by the buyer when property ownership is transferred. It is calculated based on the property’s fair market value. In British Columbia, the rate is 1% on the first $200,000, 2% on the portion between $200,000 and $2 million, and 3% on the portion over $2 million.

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30
Q

Property transfer tax is whose responsibility?

A

The buyers

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31
Q

__________________ applies to any transfer of a interest that is ___________ at the land title office. Including the sale of a fee simple interest, agreement for sale, a life estate, and a crown grant

A

Property transfer tax

Registered

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32
Q

Property transfer tax is payable by the __________ on the fair market value (at date of registration)

A

Buyer

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33
Q

For ____________________, PTT is generally calculated with reference to all _______________, including some machinery or equipment and may also be subject to PST

A

Commercial properties

Fixtures

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34
Q

Property transfer tax and foreign buyers tax

A

Basic PPT payable + 20% fair market value

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35
Q

Foreign buyers tax is how much?

A

20% fool

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36
Q

Foreign buyer tax applies to what? (Areas)

A

Residential properties in greater Vancouver regional district (GVRD), capital regional district, Fraser valley, central Okanagan, and Nanaimo district

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37
Q

If a property has both residential and commercial components, then how does foreign buyers tax apply

A

Foreign buyers tax will only apply to the residential portion not the commercial

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38
Q

Exceptions to the foreign buyers tax includ:e:

A

An individual who purchases property, pays the foreign buyers tax, and within a year becomes a permanent resident or citizen of Canada, is eligible to claim back the foreign buyers tax that he paid

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39
Q

What are the two main conditions for the application of the foreign buyers tax

A

1) the nature and location of the property (only residential)
2) the identity of the buyer

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40
Q

Foreign buyers tax conditions for application: the identity of the buyer (3 types)

A
  • foreign national
  • foreign corporation
  • taxable trustee
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41
Q

Foreign National

1/3 types of identities for the foreign tax buyer

A

Not a Canadian citizen or permanent resident of Canada

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42
Q

Foreign corporation

1/3 types of identities for the foreign tax buyer

A

Non Canadian corporation or a Canadian corporation controlled by a foreign national or another foreign corporation

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43
Q

Taxable trustee

1/3 types of identities for the foreign tax buyer

A

Trustee that is a foreign national and r foreign corporation, or a Canadian citizen or corporation that is holding title for a foreign national or foreign corporation

  • even if held in a Canadian name you must still pay
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44
Q

To be eligible for the first time homebuyers program, the buyer must be a ___________ or ______________

A

Canadian citizen

permanent resident Canada

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45
Q

To be eligible for the first time homebuyers program, the buyer generally must have lived in the province for a _________ before the purchase

A

Year

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46
Q

To be eligible to the first time homebuyers program, the buyer cannot have previously owned a _________________ anywhere in the world

A

principal residence

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47
Q

To be eligible for the first time homebuyers program, the buyer must become the buyers principal residence, have a fair market value of less than $_____________, and be _______ hectors or smaller

A

$500,000

0.5 hectares

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48
Q

Withholding taxes for non-residents who sell property

If the seller is not a resident of Canada, ____ percentage of the gross proceeds is required to be withheld by the buyer and remitted to ____________

A

25%

Canada revenue agency

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49
Q

Newly built home exemption program, two criteria

A

1) The buyer must be a Canadian citizen or permanent resident of Canada
2) The property must become the buyers principal residence, had a thing of market value of less than $750,000

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50
Q

What is capital gain

A

A profit earned from the sale of a property or other investment

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51
Q

50% or 100% of the profit realized (earned) on the sale of property is taxed, depending on whether or not it is considered a true __________ or ________

A

Capital gain

Business income

52
Q

Capital gains taxes applies to three things, what are they

A

1) property earning revenues (Rentals)
2) long term investment
3) purchase to ‘flip’ for a profit

*50% of the profit is taxed when it is capital gain

53
Q

How can you be exempt from capital gain taxation

A

If the entire property is your principal residence (to live in)

54
Q

_____________: includes money earned from any activity that is done for the purpose of making a profit

A

Business income

55
Q

________________ is taxable at individual income or corporate tax rates

A

Business income

56
Q

Flipping real estate is a business venture and ______% of the profit is taxable

A

100

Under business income

Instead of 50% of profit for capital gain

57
Q

How can you differentiate between business income and capital gain

A

-the intention / motive of the owner

  • financing method (short term
    financing to sell quickly to make profit)
  • the length of time the seller owned the property
  • how the owner intends to use it
  • The frequency or number of other similar transactions by the owner
58
Q

What are the three taxes paid while holding real estate property?

A

1) property tax
2) speculation and vacancy tax (SVT)
3) empty house tax (EHT)

59
Q

__________________: the actual value of the real property as determined by the assessor, less any exemptions that apply

A

Net Taxable Value (NTV)

60
Q

NTV = (formula)

A

(Taxes / Mill Rate) x 1000

61
Q

Mill rate is what?

A

The tax rate applied to each $1000 of net taxable value

62
Q

Reminder, NTV =

A

(Taxes / mill rate) x 1000

63
Q

Taxes =

A

(NTV / 1000) x mill rate

Just rearranged, don’t let it scare you

64
Q

NTV example

You own a house in Nanaimo and owe $1134.82 for general taxes. If Nanaimo‘s general tax mill rate is 4.829, what is the net taxable value of your house?

A

NTV = (taxes / mil rate) x 1000

NTV = ($1134.82 / 4.829) x 1000
NTV = $235, 001
65
Q

Taxes = formula example

You own a house in Vernon and the taxable value of the property is $450,000. If Vernon‘s general tax Mil rate is 5.41, how much amount of taxes are owed

A

Taxes = (NTV / 1000) x mill rate

Taxes = (450,000 / 1000) x 5.41
Taxes = $2434.50
66
Q

There is no single statute in BC that provides a comprehensive explanation of the ___________________

A

property tax system

67
Q

What are the 8 property tax systems?

A

1) Assessment Act
2) Community Charter
3) Vancouver Charter
4) School Act
5) Home Owner Grant Act
6) Land Tax Deferment Act
7) Local Government Act
8) Taxation (rural area) Tax

68
Q

Remember, act means

A

Statute law

69
Q

Who pays property taxes?

A

The Owner pays for Property Taxes!

  • Owner of fee simple interest
  • Owner of a life estate
  • Owner of an Agreement for sale
  • tenant for life
  • owner of the improvement
70
Q

Do not pay for taxes when you are on a _________________

A

Residential lease

71
Q

Are charities exempt from paying taxes?

A

Fuck no!

72
Q

What values are taxed?

The assessors decision is based on: 

A
  • location
  • present use
  • rental or revenue potential
  • selling price of land and the improvements
  • obsolescence (economic and functional)
  • replacement cost
73
Q

___________________ : an extract from the assessment roll informs the property owner of the actual value of his property

A

Assessment notice

74
Q

Assessed value =

A

Actual value!

75
Q

The assessor values the property as of __________ of the previous year 

A

July 1st

76
Q

A tax notice is:

A

A request for payment of taxes

77
Q

When are tax notices mail to owners?

A

Tax notices are mailed to owners at the end of December

Typically received by owners in January

78
Q

What is Split Classification Taxation?

A

Split Classification Taxation is a system where a property is taxed based on its different uses. Each portion of the property is assessed and taxed according to its specific classification, such as residential or commercial.

79
Q

When will BC assessment mail assessment notice to property owners?

A

December 31st

80
Q

Let’s discern between an assessment appraisel (assessor) and a private fee appraisal

A

Assessment appraisal (assessor)

  • constrained to certain dates
  • must value all interests in land
  • can not adjust estimate of value to reflect tenants interest
  • has data for all real property transactions reported by land title office

Private Fee Appraisal

  • flexible dates
  • flexible with what they value
  • can adjust estimate of value to reflect tenants interest
  • Doesn’t have access to all transaction reports
81
Q

Who is eligible for a homeowners grant

A

Only the owner-occupier of the property is eligible

Column B

82
Q

Who is exempt from taxation?

A
  • properties owned by the crown
  • Municipal properties such as hospitals, schools, aboriginal lands
  • Universities, colleges, schools
  • cemeteries
  • churches
  • some farms
  • forest land
  • golf courses
  • home owner grant
  • BC Railway, libraries 
83
Q

A tax deferral means what?

A

You can pay it later! Still gotta pay it, just not now

84
Q

Who is eligible for a tax deferral?

A

1) widow / widower
2) 55 years or older
3) permanently disabled (physically)
4) financially supporting a child

85
Q

3 criteria to meet tax deferral for the 4 categories

A

1) must be Canadian citizen / landed immigrant
2) must have lived in BC for 1 year
3) must own a certain % of equity in the property

86
Q

% of equity to be eligible for tax deferral, widows and 55 years and older

A

25% equity

87
Q

% of equity for tax deferral: permanently disabled and financially supporting a child

A

15% equity

88
Q

Who can appeal an assessment?

A

Anyone! You can always appeal too

89
Q

When would you appeal an assessment?

A
  • wrongfully valued
  • change of use
  • wrong personal information
  • improperly classified
  • wrong exemption allowed
90
Q

There are _____ assessment appeal levels

A

4

91
Q

The 4 assessment appeal levels

A 
From top:
Property assessment review PANEL
Property assessment appeal BOARD 
Supreme Court of BC
BC Court of Appeal
92
Q

Pneumonic for the assessment appeal levels

A

Peanut Butter Sandwich Allergy

Panel, Board, Supreme, Appeal

93
Q

How many days do you have to appeal the Property Assessment Panel

A

January 31st

Not really days

94
Q

When must you appeal an assessment to the property assessment appeal board by

A

By April 30th

95
Q

How many days after the Property assessment appeal board do you have to contact the next level, Supreme Court of BC

A

Within 21 days of board decision

96
Q

How many days after the Supreme Court of BC’s decision do you have to appeal to the next level

A

To BC court of appeal within 30 days of Supreme Court decision

97
Q

if the property assessment appeal board made a legal error in its decision, you can apply within ___________ after you receive decision

A

21 days

98
Q

The __________________ is an annual tax that is payable by any registered owner or co-owner of ______________ located in designated taxable regions of British Columbia, unless the owner qualifies for an exemption

A

Speculation and Vacancy Tax (SVT)

Residential property

99
Q

Speculation and vacancy tax specifics

A

Annual tax - each owner must complete annual declaration

Applies to residential property in specific, taxable regions of BC - no commercial

Can claim exemption or get tax credits

100
Q

If you have to pay speculation and vacancy tax, the rate of tax depends on who you are, what are the rates:

A

1) 2% of assessed value for foreign owners and satellite family members
2) 0.5% of assessed value for Canadian citizens or permanent resident of Canada (and not members of a satellite family)

101
Q

What is a satellite family

A

An individual or spousal unit that declares less than 50% of their total combined household income for the year on Canadian income tax returns

102
Q

Example 1 of satellite family: 70% income outside of Canada, not reported

A

1 spouse - Canadian citizen, not the house owner

= both satellite family members

103
Q

Example 2 of satellite family: 100% income outside of Canada, not reported

A

1) spouse + kids - live in BC not the house owners
2) spouse - outside of Canada most of the time, owns the house, 100% income outside of Canada

= both satellite family members

104
Q

There are ______ speculation and vacancy tax exemptions

A

1) principal residence exemption
2) rental exemption
3) non-arm lengths tenant
4) major home renovations and life events

105
Q

SVT Exemption: Principal Residence Exemption

A

Live in the home full time and the home is the principal residence for the calendar year

106
Q

SVT Exemption: Rental exemptions

A

The property must be occupied by a tenant for at least 6 months of the year, in increments of 1 month or longer

107
Q

SVT Exemption: Arms length

A

Rental exemption in respect of a non-arm’s length tenant, so long as the residence is the tenants principal residence

108
Q

SVT Exemption: Major home renovation and life events

A

Such as death, divorce, bankruptcy

109
Q

Foreign owners and members of satellite families can claim a tax credit = ___% of any income earned in BC

A

20

110
Q

EHT stands for what?

A

Empty home tax

111
Q

The empty home tax will be applicable if the property is unoccupied for ____________ of the year or more will be subject to a ___% EHT

A

Six full months (6)

3%

112
Q

The empty home tax will be applicable if the property is used as a ______________ without a hotel or Bnb license

A

Short term rentals

113
Q

The empty home tax will be applicable if the rental period is shorter than _____

A

30 days

114
Q

An exemption to the empty home tax are properties which are rented out for at least _________ in a row for a minimum of _________ in aggregate over the court of a year

A

30 days

Six months

Basically rented for 6 months in full 1 month increments

115
Q

An exemption to EHT is if the property is being used as a principal residence by the owner, a family member, or a friend for at least ______________________

A

6 months of the year

116
Q

True or false… If you file an objection to pay GST and it is affirmed by an appeals officer at the CRA, you have exhausted your options in terms of appealing the assessment

A

False!!

117
Q

Kale is purchasing a new home and pays a $75,000 deposit to the seller on March 15. The closing date for Kale‘s purchase is July 1. What are Kales GST obligations?

A

Kale must pay GST on the $75,000 deposit once the closing occurs, and the full amount of the sale price including the deposit becomes taxable

118
Q

True or false… If the seller receives an assessment from the Canada revenue agency for the amount of the GST after failing to collect it from the buyer, the seller has lost his or her ability to pursue the buyer for the amount of the tax and will be held for the liable for that amount

A

False!!

119
Q

True or false: The property transfer tax applies to any transfer of an interest in real property that is registered at the land title office, unless the transferor can rely on an exemption from PTT

A

True

120
Q

Does the school act affect the real property taxation system in BC

A

Yes

121
Q

Which statue in BC that provides a comprehensive explanation of the property tax system

A

None. In BC there is no single statue that can explain the tax system comprehensively

122
Q

When will BC assessment mail assessment notices to property owners

A

At the end of December

123
Q

It is January 6, and Mike had just received an assessment notice on his home. The assessment value of the property is shown a $600,000 which represents the value of the property as of

A

July 1 of the previous year

124
Q

Which one of the following statements best describes the difference between an assessment notice and a tax notice

A

A tax notice as a request for money, while an assessment notice is not

125
Q

Who may claim homeowners grant?

A

The owner – occupier of a property

126
Q

What would make a property owner eligible to apply for deferral of real property taxes

A

The property owners 55 years of age and over

127
Q

An appeal an a point of law regarding a real property assessment value can be made from the property assessment appeal board directly to Who?

A

BC Supreme Court

UBC Real Estate Licensing Exam (24 decks)

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