from selling a condo is taxable: - Selling a condo for a profit is usually subject to capital gains tax, with half - How long the owner lived in the condo the profit considered taxable income. However, profits from selling a principal - Pattern of buying and selling properties residence are not taxable. - Reasons given for moving - A real estate agent bought and sold a condo in Vancouver for a $30K profit - Other real estate activities and holdings within a year, claiming it was his principal residence. - Credibility of the reasons provided - The CRA discovered he had bought and sold 7 condos in 7 years.

1. FEBRUARY 2013 REAL ESTATE UPDATE
The average price of a resale home in the GTA in January From a volume perspective, the month of January
was $482,648 - a 4.3% increase versus the January 2012 witnessed a 1.3% decline in sales (4,375 transactions
average price of $462,655. Price growth varied by market versus 4,432 in January 2012). While slightly down versus
segment, as follows: single-detached homes (+4.7%), last year, the actual rate of decline was much less than
semi-detached homes (+6.5%), townhomes (+4.0%) and what was experienced in the back half of 2012. This
condo apartments (-1.2%). The MLS® Home Price Index suggests that some buyers, who put their decision to
(HPI) Composite Benchmark Price was up by 3.8% over the purchase on hold last year due to stricter mortgage
same period. These results support the thesis that there lending guidelines, are once again becoming active in the
will be enough competition between buyers to support market. Volume growth varied by market segment, as
continued growth in home prices in 2013. Expectations follows: single-detached homes (+0.7%), semi-detached
are for average price growth to be in the 3-5% range this homes (-1.1%), townhomes (-2.3%) and condo apartments
year. (-5.1%).
GTA AVERAGE RESALE PRICE GTA RESALE HOME SALES
8 $540,000
9 10 11 12 8 9 10 11 12
12,000
2011 2012 2013 2011 2012 2013
$520,000 10,500
$480,000 GTA Resale Home Sales
sale Home Sales
$500,000 9,000
7,500
$460,000 6,000
$440,000 4,500
$420,000 3,000
$400,000 1,500
JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV
for more detailed GTA statistics: REALTYSTATS.CA/5A2X
James Metcalfe BROKER
416-931-4161 Royal LePage Real Estate Services Ltd.
Johnston & Daniel Division, Brokerage
477 Mount Pleasant Rd., Toronto, ON M4S 2L9
www.OurHomeToronto.com | Service@OurHomeToronto.com
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2. PERSONAL
FINANCE
PROS AND CONS OF REVERSE MORTGAGES
If you are considering taking out a reverse mortgage, it is • The money received under a reverse mortgage does not affect
important to ensure that you understand fully how they work and Old Age Security (OAS) or Guaranteed Income Supplement
that you carefully weigh the advantages and risks. (GIS) benefits.
• You can determine the manner in which you receive your
How they work reverse mortgage funds. For example, you may receive a lump-
A reverse mortgage is a loan that is available to homeowners sum of cash, regular advances or a combination of both.
60 years of age or older. If you have a spouse or other co-owner,
the age requirement applies to both of you. A reverse mortgage The disadvantages associated with taking out a reverse mortgage
is an advance of money provided by a lender that is secured by include:
the existing debt-free equity that you have in your home. • Reverse mortgages are subject to higher interest rates than
The amount of the loan provided under a reverse mortgage is other types of mortgages and loans.
usually up to 40 per cent of the current value of your home. The • The equity in your home will decrease over the years as the
amount you can borrow depends on your age, the current interest interest on your reverse mortgage accumulates.
rate and the value of your home. Generally, the older you are, • There are significant fees associated with initiating a reverse
the larger the loan you will be able to receive. If there are mortgage, including an application fee, a home appraisal
existing outstanding loans secured by your home at the time fee and legal fees. Homeowners may also be required to take
your reverse mortgage funds are advanced, you may first be out mortgage insurance.
required to use these funds to pay off those existing debts. • You may be charged a repayment penalty for selling your
Traditional mortgage vs. reverse mortgage home or moving out within three years of obtaining a reverse
With a traditional mortgage or secured line of credit, you must mortgage.
have an adequate income verses debt ratio in order to qualify • Upon your death, your estate will be required to repay the
for the loan. Traditional mortgages also require that the borrower accumulated debt within a certain period of time. However,
make regular bi-weekly or monthly payments. A reverse mortgage the time required to deal with the estate may exceed the time
is different in that it pays you and is available to you regardless permitted to repay the debt, which could cause problems for
of your current income. With a reverse mortgage, the interest your estate.
on your loan accumulates and the equity that you have in • Since the loan and interest will need to be repaid upon your
your home decreases over time. The accumulated debt is not death, there will be less money in your estate to leave to your
required to be paid off until such time as you die, sell your home children or other beneficiaries. In many cases, repayment is
or it is no longer your principal residence. However, you are made by selling the home and then turning over the proceeds
still required to continue paying your property taxes, insurance, (or a portion of them) to the bank.
utilities and other costs associated with maintaining your home.
Advantages vs. pitfalls
Reverse mortgages have the following advantages:
• You are not required to make regular payments;
• You can receive cash for the value of your home without having
to sell it.
• The money is a tax-free source of income (unless the money is
used to invest and produce income, in which case some or all
of that income would be taxable).
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Adapted from an article contributed by June Wright. June is a lawyer with the law firm Nelligan O’Brien Payne. Please visit them at nelligan.ca.

3. CONDO
CORNER
SELLING A CONDO? BEWARE THE TAXMAN
When you sell a property that isn’t your principal residence
and make a profit, half of the amount is taxable. This is the so-
called capital gains tax and it’s pretty straight forward, but every
situation is different. It all depends on how the Canada Revenue
Agency views the transaction.
Real estate agent Romano Giusti bought a condo on Richards
Street in Vancouver in November 2006 and re-sold it in June 2007
for a profit of $30,831. When he filed his tax return, he paid no tax
on the profit, saying it was his personal residence.
The CRA re-assessed this return and discovered that Giusti had
bought and sold seven condos in seven years. He argued that
he intended to make the Richards Street condo his personal
residence, but changed his mind because of the street noise,
irresponsible renters and pets in the building. So, he moved.
Giusti appealed and lost. In a case heard on January 25, 2011,
Judge G.A. Sheridan found that Giusti was flipping houses and
so was not entitled to the principal residence exception. He
also penalized Giusti. Here are some things the court and CRA will look at in deciding
whether a profit is a capital gain or income:
For most people, if you make a $30,000 profit, you only would
pay tax on $15,000. In this case, the court found that because 1. The nature of the property sold;
Romano was in the business of buying and selling homes, he had 2. The length of the period of ownership of the property;
to pay tax on the entire profit. 3. The frequency or number of other similar transactions by the
taxpayer;
4. Any work done to make the property more marketable or to
attract purchasers;
5. The taxpayer’s motive or intention at the time he acquired
the property.
The fact that Romano was also a real estate agent did not help
him, since most of his business income related to commissions
on real estate contacts.
The key factor in most court cases is the number of deals that
you have done over the last few years. If there are not many
deals, it is unlikely that it will be called a capital gain so the profit
will be tax free. Still, if you are not sure, it is better to obtain tax
or legal advice before you sell any property, to make sure that you
are filing properly.
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This article was contributed by Mark Weisleder, a Toronto-based real estate lawyer. Please visit him at markweisleder.com.

4. One interesting change in the mortgage market of late is the Having said that, the consumer is also becoming aware
fact that the major banks are becoming much more honest that absolute rate is not the sole thing they should
and upfront about their advertised rates. In the past, they be searching for. Many are prepared (and rightly so)
were notorious for advertising “special offers” that were, in to pay a rate premium for increased flexibility (e.g.,
reality, far above their best rates. This approach was essentially liberal prepayment privileges, portability privileges,
playing people for fools. etc.). How much of a premium is really the question.
In most cases, a premium of 10-20 basis points is what the
It is in the bank’s best interest to end the practice of artificially market will bear for increased prepayment flexibility.
high advertised rates. At the heart of the issue is the
credibility of the banks and the fact that the consumer is now Given the trend of major banks to be more reasonable in their
more educated than ever. Institutions that engage in suspect upfront pricing, it will definitely become a different market.
advertising and business practices will be ferreted out by the Major bank displayed rates will be closer to brokers and
consumer and will be penalized in the long run. discount lenders and consumer negotiations will begin at a
lower rate.
Of course one of the major reasons behind the increased
market knowledge of the consumer has been the advent of As usual, your client referrals are both highly valued and much
online rate comparison sites. It is now easier than ever to appreciated. Until next time, take care!
compare the mortgage offerings of major institutions with a
few quick keystrokes.
James Metcalfe BROKER
“YOUR REFERRALS ARE SINCERELY APPRECIATED! THANK YOU!”
416-931-4161
www.OurHomeToronto.com | Service@OurHomeToronto.com
Royal LePage Real Estate Services Ltd.
GTA Res
Johnston & Daniel Division, Brokerage
477 Mount Pleasant Rd., Toronto, ON M4S 2L9
“A bank is a place that will lend you money if you can prove that you don’t need it. – Bob Hope
”
“Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you
is a maniac?” – George Carlin
“The secret of staying young is to live honestly, eat slowly, and lie about your age. – Lucille Ball
”
“What’s another word for Thesaurus?” – Steven Wright
In accordance with PIPEDA, to be removed from this mailing list please e-mail or phone this request to the REALTOR ® Not intended to solicit buyers or sellers currently under contract with a broker. The
information and opinions contained in this newsletter are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for damages resulting from
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using the published information. This newsletter is provided with the understanding that it does not render legal, accounting or other professional advice. Statistics are courtesy of the Toronto Real Estate Board. Copyright © 2013
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