OTTAWA: The Minister of National Revenue is heading to court to compel a group of developers to hand over documents in a bid to learn details about buyers who flipped pre-sale contracts before construction was completed. The federal government filed two applications in Vancouver’s federal court office on June 29, naming the developers who are behind behind two high-profile Vancouver projects, namely the Marine Gateway project on South West Marine Drive and the Residences at West along on Manitoba Street False Creek in downtown Vancouver. The Canada Revenue Agency (CRA) plans to take the corporations to court to determine if proper taxes were paid on profits. Specifically, it wants to know if buyers reported real estate profits as business income or capital gains. Officials say they want to ensure taxes were paid on the transactions from real-estate flipping, which are often high.
Canada Revenue Agency officials say they want details about people who signed agreements with the developers to buy condo units, but then assigned that purchase agreement to another person before the units were constructed. “Analysis of third-party data has revealed in the past that some flips are not being reported or incorrectly reported,” a spokesperson for the CRA wrote in an email to CBC. Flipping is defined as the practice of rapidly buying and reselling real estate for profit, and has become a high-profile issue in Vancouver’s hot real estate market, inspiring rampant speculation.
The CRA’s move took one developer by surprise. “I have never seen this type of inquiry before in my short business career of 30 years,” said Jason Hong, president and CEO of Argo Ventures, a developer behind one of the Vancouver projects named in court documents. Hong says the CRA order is a concern for clients, and no developer would comply with such a request without a court order. “We need to see if the court will allow this type of thing to be divulged,” said Hong, adding that he will do what the court decides.