Ensure you’re in the clear: Tax court decision serves as warning to home buyers
If you are planning on buying property in Canada, be sure to research who you’re buying from, or you could be stuck with a costly tax bill. A recent court case in which property was bought from a non-resident (who claimed that he was a Canadian) left the purchaser with a $92,000 tax bill. This is due to Section 116, which requires 25 percent of the purchase price to be sent to the CRA. The Canadian courts determined that the purchaser did not do enough research on the buyer, despite obtaining a declaration from the seller, and as a result, he was responsible for the tax payment. According to the judge, a “solemn declaration” is required to determine the tax residency of the seller.
“Section 116 requires the buyer to make a “reasonable inquiry” and have “no reason to believe that the seller is a non-resident of Canada.” Without this reasonable inquiry and belief about the seller, the buyer is supposed to withhold 25 per cent of the purchase price and send it to the taxman.”
Read more: https://www.theglobeandmail.com/investing/personal-finance/taxes/article-ensure-youre-in-the-clear-tax-court-decision-serves-as-warning-to/