Taxing subdivision?

Our Experts Answer:

I do not believe you are correct. Section CB12 of the Income Tax Act taxes gains from properties that are developed or divided within 10 years of acquisition where the work involves work of more than a minor nature. There is substantial case law on the subject which has been largely unhelpful to taxpayers trying to argue their work was minor. The bar is accordingly set very low. There are a number of exemptions to the section that cover circumstances where the work was done to enable the taxpayer to run a business from the land, live on the land or to derive rental income from the land. There is also a farming exemption and an exemption for taxpayers own residence where the land is less than 4500sqm. If the transaction is taxable then the focus moves to determining what gain has actually been made. This involves working out the cost of the land being sold and deducting this and the costs of development and division from the sale price. It is conceivable that you could have a taxable land transaction on which no profit has actually been made.