Humber/Ontario Real Estate Course 4 Exam Practice

A buyer client wants to understand potential tax implications of purchasing a property. Which of the following is accurate?

1. HST applies only to new home purchases, not resales.

2. A foreign buyer's tax applies to all properties purchased by non-residents of Canada.

3. Buyers could be liable for capital gains tax if the seller is a non-resident of Canada.

4. Most tax questions should be directed to an accountant, but salespersons can offer advice.

5. Property tax is included in the purchase price of the home.

6. Salespersons must provide detailed tax advice to clients.

The correct answer is: Buyers could be liable for capital gains tax if the seller is a non-resident of Canada.

The option stating that buyers could be liable for capital gains tax if the seller is a non-resident of Canada accurately reflects the tax implications involved in property transactions. When a non-resident seller disposes of property in Canada, they may be subject to capital gains tax on any profit made from the sale. In such situations, the buyer may need to withhold a portion of the sale price (typically 25% of the gross selling price) to ensure that the non-resident seller meets their tax obligations to the Canada Revenue Agency (CRA). This withholding protects the government from tax liability that may arise from the sale. Understanding this aspect is crucial for buyers, especially in transactions involving international parties. It ensures they are compliant with tax regulations and aware of potential costs associated with the transaction that could impact their overall financial planning. The nuances of Canadian tax law concerning non-resident sellers highlight the importance of being educated about tax implications when navigating real estate transactions. In contrast, other options present inaccurate or incomplete information about tax responsibilities and roles in property transactions. For instance, suggesting that an accountant is always the go-to for tax questions overlooks the fact that real estate professionals possess relevant knowledge that can guide clients, even if they are not tax experts. This nuance