Due to the booming real estate market in Canada over the past
year, the Canada Revenue Agency ("CRA") is scrutinizing the practice of "shadow
flipping" or "assignment sales". This is a sales
technique which involves the purchase of pre-built condos from a
developer and subsequent sale to other buyers at higher prices
before possession of the condo has been taken. By relying on an
"assignment clause" in the agreement of purchase and
sale, the potential purchaser can transfer or sell his interest in
the property to another purchaser before the closing date at a
profit.
This practice is very controversial and has drastically affected
the housing market, contributing to the increase in home prices,
particularly in Toronto and Vancouver, with the original sellers
receiving less for their property, and the final purchaser
potentially paying an inflated price for the same property.
Transactions in both Toronto and Vancouver have seen the greatest
incidence of these types of
