Chapter 5.2: Taxes On Real Property Flashcards
1
Q
What does GST stand for!
A
Goods and services tax
2
Q
What is GST?
A
Taxes on the purchase or sale of real property
3
Q
GST is a ____________ tax
A
Federal
4
Q
Compared to income tax, GST has a relatively _______________ of taxation
A
Low rate
5
Q
GST is imposed under the _________________
A
Excise Tax Act (ETA)
6
Q
GST applies to ______ transactions, unless it is expressly listed as an exemption in the Excise Tax Act
A
All
7
Q
If you owe GST it is a _____________ and is payable immediately - pay now, dispute late
A
debt to CRA
8
Q
The ____________ has the obligation to pay the GST
A
Buyer!
The recipient
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)
10
Q
No GST applies to _______________ for prepayments
A
Reimbursements
11
Q
Only amounts on the statement of adjustments that are legal components of the purchase price are subject to _______
A
GST
12
Q
The _________ collects the GST as an agent for the ____________. It is deemed to be held in trust
A
Seller
government
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
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
15
Q
The seller has the right to pursue the buyer for what?
A
The uncollected GST they forget to collect
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
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
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.
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
20
Q
2 specifics with input tax credit (business gst removal)
A
Commercial real property transaction
Buyer is responsible for reporting the GST
21
Q
________: a form of tax recovery that allows non-businesses to recover GST paid with respect to certain transactions
A
Rebates
22
Q
Individuals entitled to the rebate are generally required to file a ________________
A
Rebate application form
23
Q
Rebates must be filed with the CRA within ___________ of the purchase
A
2 years
24
Q
The CRA has the power to audit and then assess a buyer or seller in respect of a _____________
A
GST amount
25
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
Rebate
26
What is included in the title, residential complex
- 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
27
GST is excluded in what three items (related to real estate)
1) hotels - subject to GST
2) short term rental (AirBNB) - subject to GST
3) assignment fees - subject to GST
28
PTT stands for what?
Property transfer tax
29
What is property transfer tax
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.
30
Property transfer tax is whose responsibility?
The buyers
31
__________________ 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
Property transfer tax
Registered
32
Property transfer tax is payable by the __________ on the fair market value (at date of registration)
Buyer
33
For ____________________, PTT is generally calculated with reference to all _______________, including some machinery or equipment and may also be subject to PST
Commercial properties
Fixtures
34
Property transfer tax and foreign buyers tax
Basic PPT payable + 20% fair market value
35
Foreign buyers tax is how much?
20% fool
36
Foreign buyer tax applies to what? (Areas)
Residential properties in greater Vancouver regional district (GVRD), capital regional district, Fraser valley, central Okanagan, and Nanaimo district
37
If a property has both residential and commercial components, then how does foreign buyers tax apply
Foreign buyers tax will only apply to the residential portion not the commercial
38
Exceptions to the foreign buyers tax includ:e:
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
39
What are the two main conditions for the application of the foreign buyers tax
1) the nature and location of the property (only residential)
2) the identity of the buyer
40
Foreign buyers tax conditions for application: the identity of the buyer (3 types)
- foreign national
- foreign corporation
- taxable trustee
41
Foreign National
1/3 types of identities for the foreign tax buyer
Not a Canadian citizen or permanent resident of Canada
42
Foreign corporation
1/3 types of identities for the foreign tax buyer
Non Canadian corporation or a Canadian corporation controlled by a foreign national or another foreign corporation
43
Taxable trustee
1/3 types of identities for the foreign tax buyer
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
44
To be eligible for the first time homebuyers program, the buyer must be a ___________ or ______________
Canadian citizen
permanent resident Canada
45
To be eligible for the first time homebuyers program, the buyer generally must have lived in the province for a _________ before the purchase
Year
46
To be eligible to the first time homebuyers program, the buyer cannot have previously owned a _________________ anywhere in the world
principal residence
47
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
$500,000
0.5 hectares
48
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 ____________
25%
Canada revenue agency
49
Newly built home exemption program, two criteria
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
50
What is capital gain
A profit earned from the sale of a property or other investment
51
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 ________
Capital gain
Business income
52
Capital gains taxes applies to three things, what are they
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
How can you be exempt from capital gain taxation
If the entire property is your principal residence (to live in)
54
_____________: includes money earned from any activity that is done for the purpose of making a profit
Business income
55
________________ is taxable at individual income or corporate tax rates
Business income
56
Flipping real estate is a business venture and ______% of the profit is taxable
100
Under business income
Instead of 50% of profit for capital gain
57
How can you differentiate between business income and capital gain
-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
What are the three taxes paid while holding real estate property?
1) property tax
2) speculation and vacancy tax (SVT)
3) empty house tax (EHT)
59
__________________: the actual value of the real property as determined by the assessor, less any exemptions that apply
Net Taxable Value (NTV)
60
NTV = (formula)
(Taxes / Mill Rate) x 1000
61
Mill rate is what?
The tax rate applied to each $1000 of net taxable value
62
Reminder, NTV =
(Taxes / mill rate) x 1000
63
Taxes =
(NTV / 1000) x mill rate
Just rearranged, don’t let it scare you
64
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?
NTV = (taxes / mil rate) x 1000
```
NTV = ($1134.82 / 4.829) x 1000
NTV = $235, 001
```
65
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
Taxes = (NTV / 1000) x mill rate
```
Taxes = (450,000 / 1000) x 5.41
Taxes = $2434.50
```
66
There is no single statute in BC that provides a comprehensive explanation of the ___________________
property tax system
67
What are the 8 property tax systems?
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
Remember, act means
Statute law
69
Who pays property taxes?
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
Do not pay for taxes when you are on a _________________
Residential lease
71
Are charities exempt from paying taxes?
Fuck no!
72
What values are taxed?
| The assessors decision is based on: 
- location
- present use
- rental or revenue potential
- selling price of land and the improvements
- obsolescence (economic and functional)
- replacement cost
73
___________________ : an extract from the assessment roll informs the property owner of the actual value of his property
Assessment notice
74
Assessed value =
Actual value!
75
The assessor values the property as of __________ of the previous year 
July 1st
76
A tax notice is:
A request for payment of taxes
77
When are tax notices mail to owners?
Tax notices are mailed to owners at the end of December
Typically received by owners in January
78
What is Split Classification Taxation?
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
When will BC assessment mail assessment notice to property owners?
December 31st
80
Let’s discern between an assessment appraisel (assessor) and a private fee appraisal
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
Who is eligible for a homeowners grant
Only the owner-occupier of the property is eligible
Column B
82
Who is exempt from taxation?
- 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
A tax deferral means what?
You can pay it later! Still gotta pay it, just not now
84
Who is eligible for a tax deferral?
1) widow / widower
2) 55 years or older
3) permanently disabled (physically)
4) financially supporting a child
85
3 criteria to meet tax deferral for the 4 categories
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
% of equity to be eligible for tax deferral, widows and 55 years and older
25% equity
87
% of equity for tax deferral: permanently disabled and financially supporting a child
15% equity
88
Who can appeal an assessment?
Anyone! You can always appeal too
89
When would you appeal an assessment?
- wrongfully valued
- change of use
- wrong personal information
- improperly classified
- wrong exemption allowed
90
There are _____ assessment appeal levels
4
91
The 4 assessment appeal levels
```
From top:
Property assessment review PANEL
Property assessment appeal BOARD
Supreme Court of BC
BC Court of Appeal
```
92
Pneumonic for the assessment appeal levels
Peanut Butter Sandwich Allergy
Panel, Board, Supreme, Appeal
93
How many days do you have to appeal the Property Assessment Panel
January 31st
Not really days
94
When must you appeal an assessment to the property assessment appeal board by
By April 30th
95
How many days after the Property assessment appeal board do you have to contact the next level, Supreme Court of BC
Within 21 days of board decision
96
How many days after the Supreme Court of BC’s decision do you have to appeal to the next level
To BC court of appeal within 30 days of Supreme Court decision
97
if the property assessment appeal board made a legal error in its decision, you can apply within ___________ after you receive decision
21 days
98
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
Speculation and Vacancy Tax (SVT)
Residential property
99
Speculation and vacancy tax specifics
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
If you have to pay speculation and vacancy tax, the rate of tax depends on who you are, what are the rates:
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
What is a satellite family
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
Example 1 of satellite family: 70% income outside of Canada, not reported
#1 spouse - Canadian citizen, not the house owner
#2 spouse - not a Canadian citizen, owns the house
= both satellite family members
103
Example 2 of satellite family: 100% income outside of Canada, not reported
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
There are ______ speculation and vacancy tax exemptions
1) principal residence exemption
2) rental exemption
3) non-arm lengths tenant
4) major home renovations and life events
105
SVT Exemption: Principal Residence Exemption
Live in the home full time and the home is the principal residence for the calendar year
106
SVT Exemption: Rental exemptions
The property must be occupied by a tenant for at least 6 months of the year, in increments of 1 month or longer
107
SVT Exemption: Arms length
Rental exemption in respect of a non-arm’s length tenant, so long as the residence is the tenants principal residence
108
SVT Exemption: Major home renovation and life events
Such as death, divorce, bankruptcy
109
Foreign owners and members of satellite families can claim a tax credit = ___% of any income earned in BC
20
110
EHT stands for what?
Empty home tax
111
The empty home tax will be applicable if the property is unoccupied for ____________ of the year or more will be subject to a ___% EHT
Six full months (6)
3%
112
The empty home tax will be applicable if the property is used as a ______________ without a hotel or Bnb license
Short term rentals
113
The empty home tax will be applicable if the rental period is shorter than _____
30 days
114
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
30 days
Six months
Basically rented for 6 months in full 1 month increments
115
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 ______________________
6 months of the year
116
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
False!!
117
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?
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
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
False!!
119
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
True
120
Does the school act affect the real property taxation system in BC
Yes
121
Which statue in BC that provides a comprehensive explanation of the property tax system
None. In BC there is no single statue that can explain the tax system comprehensively
122
When will BC assessment mail assessment notices to property owners
At the end of December
123
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
July 1 of the previous year
124
Which one of the following statements best describes the difference between an assessment notice and a tax notice
A tax notice as a request for money, while an assessment notice is not
125
Who may claim homeowners grant?
The owner – occupier of a property
126
What would make a property owner eligible to apply for deferral of real property taxes
The property owners 55 years of age and over
127
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?
BC Supreme Court
