What the rule does
A flipped property, in the CRA’s terms, is a housing unit in Canada that is not already your inventory and that you owned for fewer than 365 consecutive days before you disposed of it. The rule also reaches a right to buy a housing unit, so reselling a purchase right before the sale closes can be caught. For someone holding such a right, the holding period restarts when the buyer named in the original agreement takes ownership.
When the rule applies, the profit is deemed business income and is fully taxable. It cannot be treated as a capital gain, and the principal residence exemption is not available. If the sale produces a loss, the loss is deemed to be nil, so it cannot offset other income. The rule is federal, so it applies in Ontario in the same way as elsewhere in Canada.
An illustrative example
This example is illustrative and uses round numbers. Suppose you buy a condominium, rent it out and sell it eight months later for $40,000 more than everything you paid and spent. Unless an exception applies, the $40,000 is business income rather than a capital gain, where only a portion would be included in income. If you sold it for $20,000 less than your costs instead, the loss would be treated as nil.
Selling after 365 days or more does not decide the question the other way. If the rule does not apply, whether the profit is business income or a capital gain still depends on the facts, such as your intention when you bought and how you handled the property. Capital gains are reported on Schedule 3 and business income on Form T2125.
The life-event exceptions
The rule does not apply if the sale is reasonably considered to happen because of, or in anticipation of, one of several events. These include the death of you or a related person, a related person joining your household or you joining theirs, a separation of at least 90 days, a threat to personal safety, a serious disability or illness, the involuntary loss of your or your spouse’s job, an eligible relocation, your insolvency, and the destruction or expropriation of the property.
The wording turns on what is reasonable, so records help. Keep documents that show the event and its timing, such as a separation date, a job-loss notice or a relocation letter. How the 365 days are counted from your agreement and closing dates is worth confirming with your accountant before you list a property.
What to discuss with your accountant
Raise the question before you sell, not after. Bring the purchase and sale dates, any assignment agreement, and notes on why you are selling. Ask how the sale will be reported and whether any exception fits.
If you are weighing a quick sale of a home, rental or cottage, ask how it interacts with the principal residence exemption and with capital gains, covered in those entries.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Residential Property Flipping RuleCanada Revenue Agency
- Principal residenceCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.