Anti-Home Flipping Rules: BC Home Flipping Tax Q&A - Extended Discussion

This article follows our previous article as such: https://antonioromerrow.wixsite.com/lakeshore-tax-1/post/anti-home-flipping-rules-bc-s-new-home-flipping-tax-summary

We have been asked a few specific questions surrounding the BC Residential Property (Short-Term Holding) Profit Tax Act (the "flipping tax" as previously discussed in a prior article), specifically with relation to organizational structure - PRE, Corporations, Trusts, and Partnership attribution.

As we mentioned previously, the province has outlined that "a person (which can include an individual, corporation, partnership or trust), the seller of which may be a B.C. resident or a resident anywhere else in the world" may be subject to the filling tax.

In this Q&A, we aim to clarify who exactly falls into the scope of this definition within each type of arrangement.

1. Who Bears the Tax Burden When the Beneficial Owner is a Corporation?

   
   

To ask such a question would imply that there is a bare trust arrangement in place; whereby the legal owner (yourself) holds title to the property, but the benefits of the property confer onto a corporation (may be a holding co.). This setup protects anonymity but doesn't shield from the levy. The province clearly outlines "a beneficial interest in residential property is transferred form the seller to the purchaser".

Consider the perspective of settlement; meaning the settlor of a bare trust is also deemed to be the beneficiary (ITA 75(2) attribution doesn't normally apply to bare trusts because there's no meaningful trust separation to attribute through. It's a nominee shell, not a splitting vehicle).

If that beneficiary is a corporation, then the subjection of the flipping tax falls on the corporation. This means the liability to pay the flipping tax falls within the corporations fiscal year, but the filing requirement lies with the Trustee (you).

• It is also worth noting that as a director of the corporation, you're responsible for the oversight of filing all applicable corporate returns anyways. This then begins to make more sense.

  
  

The downside?

No Exemptions for Corps Here: Unlike sales between related individuals and corporations (which get a pass), bare trusts don't trigger that relief. And the $20K primary residence deduction? Off-limits for corporations, obviously – it's only for individuals or trusts with individual beneficiaries who lived there primarily (assuming no other elections).

2. My property is held in a living trust (family trust). Who pays if the trust sells?

Presuming you purchased or transferred the property into trust (that's not a bare trust) .. why you would choose to avidly flip properties in a trust I'm not too sure, but here you are ..

The real question is .. is the trust liable for the tax? Or are the beneficiaries?

Pursuant to the BC Residential Property Profit Tax Act , trusts qualify as a "persons" , thereby the liability would theoretically confer onto the trust. However, based on the provincial flipping tax official guidance, the answer is nuanced: The trust bears primary liability, but beneficiaries can be jointly and severally liable if the trust doesn't pay – making them a backstop for collection. This would ensure that the tax doesn't evaporate within a complex structure.

The secondary liability is triggered when a trust does not pay the flipping tax, but instead opts out of filing the applicable return and instead chooses to distribute earnings from the flipped property to the applicable beneficiaries (as a pass through). The BC Ministry of Finance can chase down each beneficiary up to their share of the distributed net profit.

The upside?

As we mentioned above with regard to a bare trust, no principle exemption is available. However, this is not the case with living trusts, as trusts can claim up to $20K off their net taxable income earned if held 365+ days and it was a beneficiary's principal residence. This reduces the trust's liability, indirectly protecting beneficiaries.

3. We are a member of an LLP that sold a property subject to the BC flipping tax. Is the General Partner (GP) liable for the tax? or are the Partners liable?

Under the Act, the tax applies to "persons" disposing of taxable property – and partnerships explicitly qualify as persons. When the partnership sells (or assigns) a beneficial interest in BC residential property within 730 days, the partnership bears the primary tax liability on the net profit, but the GP handles filing and payment – and can face personal exposure if things go awry. This mirrors trust dynamics.

The GP (or designated partner) typically signs and submits on behalf of the partnership, as they're the management arm in an LLP. Unlike federal income tax however (where profits pass to partners via T5013 slips), this provincial tax sticks at the partnership level first. Partners aren't directly taxed on the flip unless distributions create secondary issues.

As we saw above with regard to secondary liability on distribution of earnings, partners receiving distributions prior to settlement of the flipping tax liability may become exposed to the liability themselves. This appears to be consistent throughout the act.

Exemption for Total Partnership

There is partnership-specific carve-out to prevent the tax from punishing genuine hardships, even in group structures, whereby section 12(3) provides relief: A partnership is exempt from the tax if all its partners would individually qualify for an exemption under the life circumstance rules (sections 13–18 of the Act).

If every single partner in the partnership qualifies for a personal exemption from the Flipping Tax, the entire partnership gets a full pass – no tax, and often no filing required.

This carve-out recognizes that partnerships often involve individuals facing shared life events (e.g., a family LLP relocating for a group business, etc.). Without it, one partner's exemption wouldn't shield the whole entity.

Example: A two-partner LP (both individuals) buys a Victoria duplex on Jan 1, 2025. Both partners lose jobs in a layoff wave on June 1, forcing a sale on July 15 (under 730 days, $50K net profit). Each partner qualifies for the "involuntary termination" exemption. Result: All partners exempt → partnership exempt, no tax, no filing.

Counter-Example: Same LP, but one partner qualifies (job loss), the other doesn't (voluntary quit). Not all exempt → partnership taxed at 20% on full profit ($10K owed), must file within 90 days.

Partnership Liability Summary

Scenario	Primary Liability	GP/LLP Role	Key Deadline
Partnership Pays Timely	Partnership	GP Files/Pays; LLPs Protected	90 Days Post-Sale
Partnership Defaults	Partnership + Partners (Jointly)	GP Unlimited; LLPs Capped at Share	90 Days Post-Sale
All Partners Exempt	None	Full Exemption for Partnership	No Filing Needed
Related Sale	None	Tacks Holding Period	N/A

4. Do I still need to pay the flipping tax even if the property was my primary residence that I owned for less than 730 days?

Yes. Although a federal PRE exemption will exempt you from the tax consequences of selling, there is no provincial exemption outside of the $20,000 deduction. Even if you bought before 2025, sold on/after January 1, 2025, if your count is under 730 days owned, you become a subject of the tax. Primary residence status doesn't exempt you outright – it's about curbing speculation, not punishing moves.

Example: Say you buy a Kelowna house (your primary residence) on March 1, 2025, for $800,000. You live there full-time, then sell on October 1, 2025 (214 days owned – under 365, so no deduction). Sale price: $850,000; costs: $25,000. Net income: $25,000. Tax: 20% = $5,000 owed.

Counter-Example: Same buy, but sell on June 1, 2026 (after 457 days – qualifies for deduction). Net income still $25,000 minus $20,000 deduction = $5,000 taxable. Rate ~10% (mid-second year) = $500 owed.

If net income is $15,000 (after 365+ days), deduction zeros it out – $0 tax.

The applicable flipping tax return should be filed within 90 days of sale, even if exempt or zero tax.

Late? Penalties and interest apply.

We will update this article as more Q&A arises.