Selling Within 12 Months of Buying: The Residential Property Flipping Rule

Homes held less than 12 months taxed as business income, and the exceptions

Scott Tang, CPAUpdated 2026-11-052026 rules4 min read

Since 2023, Canada has had a specific rule for homes that are bought and quickly resold: if you sell a housing unit in Canada, or a right to acquire one (including a pre-construction assignment), after holding it for less than 365 days, the profit is generally taxed in full as business income, and the principal residence exemption can't be used — unless the sale is because of (or in anticipation of) a life event set out in the law, such as separation, illness or a new job. If an exception applies, it only means this rule doesn't apply; whether the profit is business income or a capital gain, and whether the exemption can be used, still has to be decided on the facts.

365 days

A home sold after being held for less than 365 (consecutive) days falls under the flipping rule

100%

The full profit is included in income, not half as with a capital gain

No exemption

The principal residence exemption can't be used

Losses don't count

A loss calculated under this rule is deemed to be nil

When the rule applies

Situation	Flipping rule applies Held less than 365 days	Doesn't apply An exception or other rules
Bought to live in, sold six months later	✓Unless one of the life events below applies	—
Pre-construction assignment	✓Assigning the contract rights counts too	—
Bought to rent out, sold 10 months later	✓	—
Sold because of divorce or separation, a new child, or a death in the family	—	✓An exempt life event
Sold because of a new job, being laid off, or illness	—	✓An exempt life event (specific conditions apply)
Held for more than 365 days	—	◐This rule doesn't apply, but the CRA may still treat the profit as business income based on the facts

Bought to live in, sold six months later

🏠 Flipping rule applies: ✓Unless one of the life events below applies
✅ Doesn't apply: —

Pre-construction assignment

🏠 Flipping rule applies: ✓Assigning the contract rights counts too
✅ Doesn't apply: —

Bought to rent out, sold 10 months later

🏠 Flipping rule applies: ✓
✅ Doesn't apply: —

Sold because of divorce or separation, a new child, or a death in the family

🏠 Flipping rule applies: —
✅ Doesn't apply: ✓An exempt life event

Sold because of a new job, being laid off, or illness

🏠 Flipping rule applies: —
✅ Doesn't apply: ✓An exempt life event (specific conditions apply)

Held for more than 365 days

🏠 Flipping rule applies: —
✅ Doesn't apply: ◐This rule doesn't apply, but the CRA may still treat the profit as business income based on the facts

Life events that are exceptions

For each of these, the sale must be because of, or in anticipation of, the event, and you should keep evidence.

Death
Your death or the death of a related family member.
A new household member
A birth, an adoption, or taking in a relative who needs care.
Separation or divorce
The breakdown of a relationship, with at least 90 days of separation.
Personal safety
Situations that threaten your personal safety, such as domestic violence.
Illness or disability
A serious illness or disability affecting you or a family member.
Moving for work or school
You or your spouse move for a new job, or you move to attend full-time post-secondary studies (to a home at least 40 km closer to the new work location or school), or you or your spouse are involuntarily terminated.
Insolvency
Bankruptcy or being unable to pay your debts.
Home damaged or destroyed
A natural disaster, or expropriation.

How big the difference is

Item	Held over 1 year, lived in	Under 365 days, no exception
How the profit is treated	Principal residence exemption, usually fully exempt	Business income, 100% taxable
Example: a $100,000 profit	Usually $0	The full $100,000 is included in income
Losses	A loss on your own home can't be deducted anyway	Deemed nil, so it can't be deducted either
HST	Usually not relevant for a resale home you lived in; depends on the nature of the supply	A pre-construction assignment usually needs an HST review, based on the nature of the supply and your status

Points to watch

How the 365 days are counted
Based on the period you actually held the right or the property; for a pre-construction unit, the period you held the contract rights and the period you held the property after closing need to be checked separately.
Exceptions need evidence
An employment contract, a doctor's note, a separation agreement — if an exception applies, keep the documents.
Over 1 year isn't necessarily safe
If you buy and sell often, renovate and resell quickly, or buy intending to sell, the CRA may still treat the profit as business income.

How Sheng Qian CPA can help

Review before you sell
If you plan to sell after holding for less than a year, we first check whether an exception applies and how much difference it makes to the tax.
Keep evidence for the exception
We list the documents you need and explain the position clearly when you file your tax return.
Pre-construction assignments in one go
Income tax and HST handled together; for prices, see "What Sheng Qian CPA Can Do for Investors: Tax Returns, Accounts and Annual Planning" in this series.

Sources

Disclaimer

This article is general information only and is not tax advice. Everyone's situation is different; please consult a CPA about your specific arrangements. Service fees are as set out in our written quote.