A number of stories are coming out of people who sell an asset (condos for example), then sell and think they pay capital gains. Instead, the CRA challenges that, and states that the sale is business income.

The stakes are high. Let’s say there is a profit of $50,000. If the person did not intend to buy and sell the condo for profit (i.e. bought the condo then got married and moved to a house), they should pay capital gains. The $50,000 profit is included in income at a 50% rate, or $25,000, and taxed at the highest marginal rate of income.

However, if  the facts indicate that the individual likely intended to sell for profit or had a backup plan in the likely case they would sell, the rules change. The transaction is considered business income, and included in income at a 100% rate. The tax is now on $50,000.

There are many factors to weigh in making the case for the taxpayer or for the CRA. Consult a professional if you need to explore this further.