Category Archives: flipping properties

Condo flippers beware: The taxman is watching you, and has new tools at his disposal to ‘take action’

A condo building in downtown Toronto.Jack Boland/Toronto Sun/Postmedia Network

If you plan on selling a home or condo that you bought fairly recently, especially if you never actually moved into it, be wary as the tax man will be carefully watching how you report any gain on your tax return, lest it be seen as a “flip” and be fully taxable as income, rather than a half-taxable capital gain.

The Canada Revenue Agency’s ability to hunt you down over your real estate transactions has improved thanks to the recent $50-million boost in funding over five years announced in the 2019 federal budget to help “address tax non-compliance in real estate transactions.” The CRA uses advanced risk assessment tools, analytics and third-party data to detect and “take action” whenever it finds real estate transactions where the parties have failed to pay the required taxes. Specifically, the CRA is focusing on ensuring that taxpayers report all sales of their principal residence on their tax returns, properly report any capital gain derived from a real estate sale where the principal residence tax exemption does not apply, and report money made on real estate “flipping” as 100 per cent taxable income.

But what, exactly, constitutes a real estate flip? That was the subject of a recent Tax Court of Canada decision, released this week.


The case involved a transit operator for the Toronto Transit Commission who, along with his brother, bought and moved into a two-story, three-bedroom townhouse in Vaughan, Ontario, in 1999. His brother contributed toward the initial down payment, lived with him and together they equally shared all household expenses, including the mortgage payments. In 2003, the taxpayer’s brother met the woman who would become his future wife, whom he married in April 2007. She moved into the townhouse and they had a child together in February 2008.

Sometime prior to this, the taxpayer and his brother began discussing going their separate ways. The taxpayer testified that he wanted to sell the townhouse and move to a place that was smaller and closer to work. Indeed, in 2006 he found a smaller place, a two-bedroom condo, which was in the pre-construction phase. The tentative occupancy date of the condo was April 2008, but that date was pushed back several times, ultimately to 2010.

Prior to taking possession of the condo, however, circumstances changed. In December 2008, the brothers’ father passed away while in Jamaica, where he lived together with their mother for about six months each year. Following their father’s death, their mother did not feel safe living alone in Jamaica and in March 2009 she moved into her sons’ townhouse. The taxpayer testified that his brother and his family shared the master bedroom, while the taxpayer and their mother each occupied one of the remaining two bedrooms. This living situation didn’t last long and the taxpayer refinanced the mortgage on the townhouse in order to buy out his brother’s share of the property, enabling him and his family to move out.

In August 2010, the taxpayer took possession of the condo and immediately arranged to list it for sale, realizing that it would be too small for both he and his mother. No one lived in the condo in the interim. He sold it in October 2010 resulting in a net gain of $13,412, which the taxpayer reported as a capital gain, taxable at 50 per cent, on his 2010 tax return. The CRA reassessed him, finding that the $13,412 should have been reported as fully taxable income and slapped him with gross negligence penalties.

The common question of whether a gain from the sale of real estate is on account of income or on account of capital always comes down to the underlying facts. The courts will look to the surrounding circumstances and, perhaps most importantly, the taxpayer’s intention.

The judge reviewed the facts in light of the four factors previously enumerated by the Supreme Court of Canada by which these types of cases are decided: the taxpayer’s intention, whether the taxpayer was engaged in any way in the real estate industry, the nature and use of the property sold and the extent to which the property was financed.

The taxpayer testified that he purchased the condo with the full intention of living in it after his brother moved out of their shared townhouse; however, when his father died and his mother wished to return to Canada to live full-time, the taxpayer “changed his plans to move so that his mother could live with him at (the townhouse), which was a larger space.” He testified that since he could not afford to own both homes, he listed and sold the condo shortly after assuming title. As he testified, if not for his father’s death and his mother’s return to Canada, he would have carried out his plan to sell the townhouse and live in the condo as his primary residence.

The judge concluded that the taxpayer’s intention with respect to the condo was indeed to live in it as his primary residence. He had no secondary intention of putting the condo up for resale at the time of purchase.

The judge therefore concluded that the sale of the condo was properly reported as a capital gain and ordered the CRA to reassess on that basis and cancel the gross negligence penalties.

One final note is warranted: while justice was ultimately done and the taxpayer prevailed, it actually took him nine years and three separate visits to court to get relief. The CRA originally reassessed his 2010 capital gain as income back in 2014. The taxpayer filed a Notice of Objection to oppose the reassessment, which was reconfirmed by the CRA in January 2016. The taxpayer then had 90 days to appeal the CRA’s reassessment to the Tax Court. For a variety of reasons, he missed that deadline and ended up in Tax Court seeking an extension of the deadline to file an appeal. The Tax Court denied his request for an extension. He then went to the Federal Court of Appeal which, in June 2017, reversed the lower court’s decision and allowed an extension of time to appeal to Tax Court, which heard the case in March 2019 and released its decision this week.


Source: Financial Post – Jamie Golombek July 5, 2019


Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Financial Planning & Advice Group in Toronto.

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The red-hot market that has a property type for every investor

Forget the GTA: This one booming market could be the next big thing, according to one veteran.

It’s being billed as Silicon Valley of the North and for good reason.  Due to many factors, including an influx of technology companies, Waterloo is one housing market that is ripe for the investor picking, according to Karl Innanen, managing director at Colliers International.

“Waterloo has become recognized as a diverse market – it has universities, it’s home to some of the largest insurance companies, its known for its technology and manufacturing sectors,” Innanen told Canadian Real Estate Wealth. “It’s not a one-horse town so it allows for great diversity in terms of investment options.”

It’s become a hot and, indeed, safe market for investors because of the large transactions and liquidity that has poured in over the past few years, according to Innanen.

The Waterloo Region is also unique in that it comprises three different cities that each offer their own investment options.

Waterloo offers opportunities for office investment; Cambridge is known for its industrial offersings; and Kitchener is home to many urban office opportunities.

And there are plenty of residential opportunities throughout the region for investors as well.

“Residential is front-and-centre in the Waterloo Region; there are 3,200 new homes built every year … and the demand is there (for rentals),” Innanen said. “There are a lot of condos being built; 2011 was the first time there were more apartments built than there were single-family homes.”

Innanen argues the Waterloo region is a better option for investors than the GTA.

“A lot of people are pushed out of the GTA because of product availability; Waterloo also offers higher returns (than the GTA),” he said. “You will get a 1% higher cap rate in the Waterloo region than the GTA for apartments. And apartments offer the lowest cap rates in the region.”

Source; Canadian Real Estate Wealth – by Justin da Rosa 26 Feb 2016

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Tax implications for selling a U.S. property

I’m considering selling my property in the U.S. I know I’ll need to pay capital gains on the appreciated value but do I claim the gains in U.S. or Canadian currency?

—Paul and Barb, Fort McMurray, Alta.

Timing is everything, in both comedy and taxes. According to Philippe Brideau, spokesperson for the CRA, both the cost of the property to buy and the proceeds of the sale must be converted into Canadian dollars using the exchange rate at the time of each transaction. You then report the capital gain, or loss, on your tax return based on “the difference between those two Canadian dollar amounts.” But the CRA isn’t the only tax collector to consider. The U.S. also cares about that property sale, explains Kim Moody of Calgary-based Moodys Gartner Tax Law. “A Canadian needs to first report a gain or loss in the U.S. by filing a U.S. tax return—form 1040NR—and paying any applicable U.S. taxes.” Expect to pay a withholding tax to the Internal Revenue Service, which you claim as a foreign tax credit on your Canadian tax return. Now, if this is a place in the sunny south, I hope you get to enjoy one last season down there.

Source: – Bruce Sellery February 2016

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Why Real Estate Is One of the Best Ways to Make Money

Why real estate is one of the best ways to make money

After a decade of saving and investing, I think real estate is one of the best ways to make money and build wealth.  Here is why.

There are many ways to turn a profit with real estate.

When you buy a stock, the only way you can make money is if the stock appreciates in value, and you sell it at the good time. With real estate you can make money in many ways, I can name those 12 off the top of my head, and there are many more.

  • Rental income. That one is the main source of profit investors are going for when buying a rental, and doesn’t need an explanation.
  • Buying low. You turn an instant profit if you manage to buy a property for under market value. Think foreclosures, quick sales, and awesome negotiation skills.
  • Selling high. You can make extra money if you stage the property to attract buyers over market value. With stocks, you always buy and sell at market value. With real estate, you can try to beat the market.
  • Increasing equity. If you take a mortgage to finance a rental, you are increasing your equity with every mortgage payment. I put down 25% on my last rental and with mortgage repayments am around 33% equity at the moment, those 8% of the property value were paid by rents and are increasing my net worth every month.
  • Leverage increases returns. If you put 20% down on a property, you will still receive rental income based on 100% of the property value, making it a great return for your 20%. Say your property is worth $100,000 and you charge $750 in rent with $500 in mortgage, taxes and fees. You have a $250 profit on $20,000 down. That is $3,000 a year, or a cool 15% return on your deposit. Good luck trying to get an almost guaranteed 15% on stocks.
  • Leverage makes you profit on the full selling price. If that same $100,000 property you bought with $20,000 down sells for $120,000 a few years later, you get your $20,000 plus principal payments back, and a $20,000 profit. It is only a 20% profit over the full value of the property, but thanks to your leverage, you are making a profit of 100%, minus principal payments to the $80,000 mortgage. The bigger the leverage, the greater the return.
  • Renting smaller units. I rent three rooms by the room, to three tenants. I can charge more than if one family was renting the whole place. You can divide your family house into a duplex or a triplex and increase the rent.
  • Renting to businesses. Businesses are a different type of tenure and rents are generally higher. They are also safer if you choose a well known business to rent to.
  • Tax benefits on interest. Depending on your country of residence, you can often deduce the mortgage interest from the rental income, and create a tax free profit.
  • Tax benefits on improvements. You can also deduce the cost of the improvements from the rental income, while the added value to the property is yours to keep.
  • Profit from a lump sum on a refinance. So you bought your $100,000 place, and put $10,000 worth of improvements, that the tenants paid back with rents. The property is now worth $125,000 because your contractor did a great job, you can refinance to get the $25,000 cash and put 25% down on your next $100,000 rental!
  • Profit from extra cash flow on a refinance. If you are able to refinance the property to lower your mortgage bill payments while the rent stays the same, you are generating more cash flow every month. You can build a cushion for maintenance, save up for a deposit on a new rental, or have more passive income to live off.


Why real estate is one of the best ways to make money

There is less risk in real estate leverage than in stock leverage

Stocks are volatile. Penny stocks and currencies even more so. Some trading companies will allow you to trade on leverage. That means if you buy 1,000,000 shares of a penny stock valued at $0.05, the trading company will not require that you fund your account with the full $50,000, it will let you buy the shares with only $5,000, BUT if the share goes down to $0.045, which it almost certainly will, you will get a margin call and your whole account balance will be wiped out.

With real estate, you can put the same $5,000 as a deposit on a $50,000 or even a $100,000 house, and rent it. If you have a renter, you don’t really care about the ups and downs of the market, as you are able to meet your monthly repayments. If the property sits empty for a while, all you have to do to keep it is pay the mortgage yourself. It isn’t fun, but it is much better than seeing your whole trading account annihilated by a margin call.

Real estate is what you do with it

I bought my first rental cash when I was 22, let the property rot and did not invest a dime in repairs in 10 years. The result? A low rent and quite a bad tenant. He was there before I bought the place and I wanted to have him out before renovating, but he beat me to the game, stayed for 10 years, died, I had to evict his widow, and managed to sell the place a few months later for double the money.

My last rental is a different story. I bought a brand new property, furnished it nicely, set up rental prices that are not outrageous but will drive away the worst tenants, and positions the place as an upscale flatshare for young professionals, instead of a bottom range share for first year students.

What you plan on doing with the property should determine the area you buy in, the type of unit you buy, the state of the property, and all details about said property. If you are not handy and hate to renovate, buy a new place or somewhere you can afford to hire out the renovation without tanking your operation. If you want to rent to families only, buy a nice family home in a good school district. For young professionals, find an affordable studio or 1 bed that is an easy commute from a dynamic zone of employment.

The same thing applies to managing the place yourself or not. Property managers will happily do the job for a fee, and if you are busy, that fee will be worth your time and then some. It will however decrease your profit. Choose to do it yourself, and you will have all sorts of headaches, and a source of income you can no longer call passive.

How you profit from real estate depends on YOU. When you buy a stock, you never know, for as much as you study the company, if its CEO isn’t about to leave and the next one will run the company to the ground, if there is a merger with a less profitable company in the pipeline, or if an earthquake will destroy the production plant in China. Your real estate investment will be a result of your own efforts to renovate a place, promote it, screen a proper tenant, and keep it up over the years. And real estate is tangible. When all the markets tank, you are trying to hold to your losing positions in hopes they will go up in a few months, or hurrying to sell at a loss before it gets worse. Real estate will bring you a monthly rent to cover the mortgage, even if you have negative equity. And in periods of economic turmoil, when people lose their houses to foreclosure or first time buyers are denied mortgages by the banks, you will have more potential renters than ever. When things go back to normal, home prices will increase and you can make a nice exit, sit it out until the next crisis, and go back in the game to buy low. Don’t want to time the market? Just buy. Now is as good a time as any, for all the reasons mentioned above.

Source: Huffington Post – Pauline Paquin; 02/16/2016 04:42 pm


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The rise of Willowdale, Toronto’s hottest new neighbourhood

Infill houses line much of the block of Elmwood Ave., across the street from 165 Elmwood Ave., an original North York backsplit that just sold in Oct. 2015 for $1.5 million.

Builders are always looking for bargains, so it caused quite a stir when a pleasant backsplit went on the market in North York’s Willowdale area earlier this month for what may have seemed like a crazy amount to anyone else — $1.1 million.

It didn’t matter that its four bedrooms featured a virtual rainbow of wall-to-wall carpeting, or that its panelled kitchen was far more dated than designer.

All that counted to the dozens of interested builders who filed through the front door the first two frantic days was the patch of grass and asphalt on which the house has stood since 1961 — all 40 by 131 feet of it.

By Day 3 some 17 offers had been registered. The best was for $1.551 million — more than $400,000 over the asking price.

“Seventeen isn’t so crazy. That’s happening a lot here now,” says long-time next-door neighbour Johnny Yoon, who is also a realtor in this booming Yonge St. and Sheppard Ave. area.

This once-sleepy suburban neighbourhood is one of the hottest real estate markets in Toronto right now, partly due to demand from wealthy Persians and Chinese.

All that foreign interest has spurred a staggering remake of this quiet residential pocket that started some years ago but has exploded, this year in particular, in bidding wars for its relatively tiny postwar homes, simply because of lots, which tend to average 50 feet, but can stretch in some cases to 70 or 90 feet.

It’s also helped skew overall real estate values for Toronto as original houses are replaced with new ones coming on the market at two to three times the former price.

Willowdale is far from alone. Rebuilds have broken out all along aged City of Toronto streets as builders cash in on the massive move to intensification across the region and a greenbelt that has set firm parameters on how much land is left for residential development.

“You’re just seeing a lot of market forces at play now,” says land economist Mark Conway of N. Barry Lyon Consultants, who’s seen a significant pickup in teardowns in his own Scarborough Bluffs neighbourhood.

“It’s pretty easy for me to understand why people are doing this — the economics are completely in line with the market when you consider that a detached house in the City of Toronto is worth over $1 million now.

“It’s definitely changing the character of neighbourhoods and it’s certainly not good for affordability. But it’s inevitable. We’re becoming a victim of our own success as a city.”

Values have especially skyrocketed in central Willowdale because its quiet, tree-lined streets are close to two subway lines (Yonge and Sheppard), highways, top-ranked schools and a host of big-city amenities — all of that now at a discount, thanks to the weak Canadian dollar.

Peyvand Jalali, one of the top real estate agents in the area has a roster of developers looking for original homes to raze and rebuild. Land values alone have escalated so dramatically the last couple of years in this area just east of the North York Civic Centre that Jalali says banks are appraising most original homes at 97 per cent land value.

That means a developer can buy an existing home for $1.5 million, tear it down, build a top-of-the-line new 3,000- or 4,000-square-foot home and make $500,000-plus, with prices now heading north of $3 million for rebuilds here boasting suburban-style basics like grand family rooms, granite-clad kitchens and spacious ensuite bathrooms.

All the demand is also being felt at city hall, where applications for zoning variances are up dramatically and there’s growing pressure from builders to go bigger than ever or sever 50-foot lots and build two homes, instead of one.

“It’s just becoming the Wild West,” says area councillor John Filion who has a dedicated staff member charged with keeping on top of rebuilding requests.

“We have bylaws for a reason and you are supposed to have a good reason to vary them, and a good reason isn’t because you want to make more money.”

Some realtors have taken to going door-to-door, says Jalali, searching for owners of original homes willing to sell. Developers like Kingsgate Luxury Homes, which didn’t return phone calls from the Star, simply post signs at existing build sites: More Lots Wanted.

All those new builds aren’t all bad, stresses land economist Conway.

Much of the city’s housing stock is aging out and not built to modern standards. They are tiny for today’s families, lack ensuite bathrooms and workable kitchens but, more importantly, they “just aren’t healthy.

“They aren’t insulated properly, some have asbestos and urea-formaldehyde so there’s good reason to rebuild many of them anyway.”

Out with the old …

328 Princess Ave.

50 by 131 foot lot

Listed Feb. 26, 2015 $1.28 million

Sold Feb. 27, 2015 $1.518 million

328 Princess Ave, which sold for $1.518 million in February.


328 Princess Ave, which sold for $1.518 million in February.

331 Princess Ave.

50 by 133 foot lot

Listed March 28, 2015 $1.288 million

Sold March 30, 2015 $1.568 million

331 Princess Ave, which sold for $1.568 million in March 2015.


331 Princess Ave, which sold for $1.568 million in March 2015.

395 Empress Ave.

50 by 125.5 foot lot

Listed March 16, 2015 $1.288 million

Sold March 26, 2015 $1.534 million

395 Empress Ave, which sold for $1.534 million in March 2015.


395 Empress Ave, which sold for $1.534 million in March 2015.

In with the new …

369 Hollywood Ave.

Asking price $2.89 million

Replaced original 1.5 storey, 2 bedroom house

Sold for $1.039 million in September 2013

369 Hollywood Ave, which has an asking price of $2.89 million.


369 Hollywood Ave, which has an asking price of $2.89 million.

156 Elmwood Ave.

Asking price $3.28 million

5 bedroom, 4,000 sf-plus

Replaced original 1.5 storey, 3 bedroom house

Sold for $1.246 million in February 2014

156 Elmwood Ave, which sold for $1.246 million in February 2014.


156 Elmwood Ave, which sold for $1.246 million in February 2014.

122 Kingsdale Ave.

Asking price $3.199 million

5 bedroom, 4,000 sf-plus

Replaced original post-war home

Sold for $1.2 million in June 2014

122 Kingsdale Ave, which sold for $1.2 million in June 2014.


122 Kingsdale Ave, which sold for $1.2 million in June 2014.

Willowdale by the numbers

Willowdale by the numbers:

46.8 % — GTA house price growth in past 5 years

63.5 % — Willowdale house price growth in past 5 years

$230 to $250 per square foot — average cost of top-of-the-line rebuild

$1.5+ million — average price of original house on 40-foot lot

$1.7+ million — average price of original house on 50-foot lot

13 — applications to sever lots in 2012

20 — applications to sever lots just to October 2015

177 — applications for variances to build bigger homes in 2012

247 — applications for variances just to October 2015

Source: Toronto Star –  Business Reporter, Published on Sat Oct 24 2015


To get your construction financing request reviewed, contact the Ray C. McMillan Team to arrange your no-obligation consultation or visit

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Profiting From Investment Real Estate


  • Learn how to find the right location and chose the right property to flip for profit.
  • Which mortgage products are best suited for real estate investors.
  • Alternative lending for hard to place real estate investment deals
  • Locating profitable rental properties.


RSVP to Sam Marji or Ray McMillan. to confirm your attendance

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The new biggest challenge for investors

Until recently, I always believed the toughest part of investing in real estate was finding the “right” income property (eg. good geographic metrics, under market rents, purpose built, good shape, good location, etc.).  In the past, my ability to find “diamonds in the rough” is what made me an effective and successful investor.  However, my opinion has now changed.

Looking back over my past few deals I realize that in today’s environment, putting the right financing in place for an investment property is now more difficult than finding a good investment property and dictates your ultimate success or failure.


Most novice investors just assume that the bank is going to use the purchase price when determining Loan-to-value.  They look at how much money they have available and work backwards.  If they have $300,000, they can use $250,000 for the down payment and $50,000 for closing costs.  This means they can buy a property for $1 million and the bank will give them a mortgage of $750,000 based on a 75% LTV. However this couldn’t be further from the truth today.

How did this situation come about?

Historically low interest rates in Canada have been the catalyst leading to:

  • Cheap cost of funds
  • Market cap compression
  • Increased demand for real estate as alternative investments (Bonds, T-Bills, GIC’s) offer poor returns
  • Limited supply

As an investor looking to acquire an income property, you welcome low interest rates but cheap cost of funds is a double edged sword.  On the one hand you want as low an interest rate as possible to minimize expenses.  However, there is a direct correlation between cost of funds and market caps.  Both move in sync which means as interest rates go down, market caps follow suit (which means the price goes up).

Why does this matter?

Market cap compression directly affects cash flow.  For instance, most income properties on the market in Toronto, and in surrounding areas, are being listed with cap rates of 4% to 4.5% (and in prime Toronto locations sub-3% market caps).  The problem is that there is a big disconnect between actual valuations dictated by the market and the criteria that banks use to value an income properties for financing purposes.

Just this week I approached two majors banks regarding an income property in a prime Toronto location and was told they use a cap rate of 6% to determine value.  A 6% cap rate on a good income property in Toronto is like a unicorn — they just don’t exist.

The numbers

Most people, like myself, like to see the real math and numbers to truly understand a concept.  So here it is.

Assume a property nets $40,000.  Based on a 4% cap, a seller would list that property for $1,000,000.  Bring that same property to the bank for financing and based on a 6% cap, that same property would be valued at $667,000.  The bank will typically offer 75% LTV which would translate into a mortgage of $500,000. The purchaser would have to come up with the balance, or $500,000 in cash, to complete the transaction.  One of the great benefits of investing in real estate historically has been the ability to leverage and borrow from the bank.

As if that wasn’t a big enough obstacle…

To make things even tougher, most banks have their own internal guidelines when determining a property’s cash flow and they differ significantly from what you see on the property’s fact sheet when it is for sale.

For example, most real estate agents will assign $400-$500 in annual repairs and maintenance per unit under expenses on the income statement.  Banks and CMHC tend to use $800-$900 per unit. If you plan to manage the property yourself, it doesn’t matter, they will assign a 4% (of gross) management expense. 

Capital expenditures warrant another 1.5% to 2% of gross.  What does this mean?  It means that if you apply these guidelines the cash flow gets even weaker making it tougher to get the financing you need.

Unless you are a REIT or have deep pockets, the erosion of leverage makes it almost impossible for the average investor to enter this market.

The solution?

That will be my next entry. Stay tuned…

Author: Paul Kondakos, BA, LL.B, MBA – Professional Real Estate Investor by CRE 27 Nov 2015

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage.

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CBC INVESTIGATES: Marco Kozlowski’s investor seminars use testimonials revoked by clients whose real estate deals collapsed

Marco Kozlowski’s free real estate seminars promise big profits using testimonials from past participants, some of which were filmed before any money was actually made.

Promotional testimonials from clients praising his methods are a key part of his marketing campaign, but CBC News has learned that at least four of the people featured in the testimonials have requested they no longer be used because they’re not accurate.

The Black Eyed Peas blast from the speakers. A charismatic tanned Californian says just $3,500 U.S. can change your life, at a November seminar hosted by Kozlowski’s company, At Will Events.

Participants are told they can get get rich with no money down and no credit by buying cheap houses from desperate Americans.

The free seminar at a Vancouver hotel is one of four CBC News attended where a charismatic speaker tries to recruit students for Marco Kozlowski’s three-day training course. Each time, video testimonials from clients who say they cashed in big time are played.

One video features Kirpal Bhogal.

Bhodal from youtube

A still image from Kirpal Bhohal’s video testimonial played at Kozlowski’s seminar. (MarcoKozlowski/youtube)

“On the second day of Marco’s training, we purchased a property for 5,000 and sold it for 62,000,” says the Toronto area man, attesting to the apparent profit he made with Kozlowski’s guidance.

The well-dressed man at the front of the room, Lance Robinson, stops the tape and asks who is ready to “invest” in the next step of the course.

“We’re gonna surround you with multi-millionaires at a three-day event,” he says.

Several people pay the tuition, having no idea that Bhogal’s success story wasn’t completely true.

Testimonial filmed before deal closed

A CBC news investigation has discovered that Kozlowski is using testimonials by Bhogal and at least three other students who say they are not accurate.

Testimonial brochure

This testimonial appears in brochure handed out at free seminars in Vancouver and Toronto in November 2015, despite Kirpal Bhogal’s request it not be used. (At Will Events Brochure)

Bhogal has confirmed to CBC that he more than once requested his testimonials not be used.

“This video was recorded just after signing the contract but before closing,” wrote Bhogal in a post on Kozlowski’s YouTube channel, which features one of two video testimonials Bhogal shot.

Lance and Marco

Marco Kozlowski, left, with Lance Robinson, who spoke on behalf of Kozloski at free seminars to recruit students for Kozlowski’s $3,500 US course, in Vancouver. (Ron Usher)

“The deals did not close; No profits were materialized.”

In a statement to CBC News Nov. 14, 2015, Kozlowski said he was not aware one of Bhogal’s deals had fallen through.

But an email suggests Kozlowski knew months ago that Bhogal was unhappy with his experience.

“Despite my verbal request and email earlier, my testimonial recorded at your office, is still being widely publicized,” wrote Bhogal to Kozlowski, May 15, 2015.

When CBC inquired why Bhogal’s testimonial was still being used, Kozlowski emailed this response.

“The testimonial is not entirely inaccurate. Mr. Bhogal made money on his first transaction,” wrote Kozlowski.

Bhogal questions whether he made any profit on that transaction, because Kozlowski applied the proceeds toward Bhogal’s tuition fees for advanced training.

“I have now instructed that his testimonial not be used in any form,” said Kozlowski.

Despite that assurance, a printed version of Bhogal’s testimonial was still being distributed at a seminar in Toronto two days later.

‘It’s not my testimonial’

Another former student who paid to attend Kozlowski’s weekend course in Toronto was shocked to see her face on one of Kozlowski’s ads in August of 2014.


A woman who never made an offer on a home was shocked to see her photo used in a testimonial, claiming a $132,000 profit. (Facebook)

“It was … saying that I made a $132,000 profit,” says Shauna Walker, furious her photo was shown beside a photo of a cheque.

“It’s not my testimonial and I never made a dollar,” she told CBC News.


Montage of advertisements showing what appears to be the same cheque for $150,329.92 used in three different testimonials. (Natalie Clancy)

“I emailed him and said this has to stop,” she said.

Kozlowski replied, “Seems an eager marketer put your head on someone else’s deal. That cheque and profit was from another Shauna.”

Three months later, her ad appeared again in a newspaper, prompting her to complain once more.

“I’ll break some heads. Sorry. Never happen again. Pinky promise,” wrote Kozlowski, Nov. 5, 2014.

An image of the same cheque appears beside other testimonials in ads published in Vancouver, Toronto and Montreal. Walker’s ad has not reappeared.

‘Many red alerts’

“I’ve attended the seminars,” says Ron Usher, a lawyer who has been tracking Kozlowski’s advertisements.

“There are many red alerts for people,” says Usher, who tried to warn Vancouver investors to stay away from a recent seminar before Kozlowski’s staff asked him to leave.

Ron Usher

Lawyer Ron Usher has been tracking what he calls misleading advertising and unrealistic promises made at seminars to recruit students. (cbc)

He says if Kozlowski has helped so many students, as he claims, why would he use a discredited testimonial?

“I just wonder why you would need to do that if there are so many successful stories?”

CBC News put that question to Marco Kozlowski, who responded, “We have many success stories … and there is no need to to use Mr. Bhogal’s testimonial.”

Kozlowski was asked to provide contact information for such students, but has not done so yet.

CBC News did speak to six Kozlowski seminar participants who said they had no complaints about their experience, including one who appeared in a testimonial.

Testimonials altered for different markets

A review of several advertisements shows other discrepancies. Testimonials from three people list them as being from different cities.

For example, “Steeve R”  is listed as living in Markham in a Toronto paper. The same photo and testimonial appears in a Montreal paper listing him as from Montreal. In other ads, he’s listed as living in Surrey and Edmonton.

Where is Steeve from

Montage of ads with testimonials from Steeve R. who is listed with various home towns in several different newspapers. (cbc)

Mistakes blamed on marketing company

Kozlowski says the discrepancies were made by a firm that has since been fired.

“The ads were the responsibility of the marketing company and neither I, nor my staff reviewed their work,” said Kozlowski.

‘Suspicious’ ads could lead to penalties

Brenda Pritchard, a lawyer specializing in advertising, says any advertiser who uses false or misleading testimonials could be prosecuted criminally or civilly under the Canadian Competition Act and face fines up to $10 million.

“It does look extremely suspicious, if you have one person’s name and picture pretending to live in different jurisdictions,” Pritchard said.

Brenda Pritchard

Advertising lawyer Brenda Pritchard says the Canadian Competition Bureau can prosecute companies that use false testimonials. (cbc)

“It’s whether or not these people actually used the service, got their results that they are representing here … all of these things have to be true and currently true.”

When asked about whether his advertising could be in violation of Canadian laws, Kozlowski wrote, “I have every intention of complying with all federal, provincial and local laws and regulations.”


Source: Natalie Clancy, CBC News Posted: Nov 24, 2015 2:37 AM PT

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Flipping houses? There are tax criteria to keep in mind

Many people think that a flipped house should qualify as a principal residence and therefore a sale should be sheltered from tax using the ‘principal residence exemption’ (PRE). And if not, the profit should at least be taxed as a capital gain, not business income. This is not always the case. (Aleutie/Getty Images/iStockphoto)

It’s no secret that if you sell your principal residence, you might be able to sell it tax-free, thanks to the “principal residence exemption” (PRE). The problem? It’s not always clear what should count as a principal residence.

Take Andrew Thurnheer, for example. This man’s home outside Ithaca, N.Y., consisted of a tree house 40 feet in the air, which he built in the mid-1980s, and includes a generator-powered elevator, shower and propane heater. If some lucky buyer managed to acquire this home from him, would it count as a principal residence?

Okay, tree houses aside, there are other examples where it’s not clear that a place should be considered a principal residence. Consider the example where you buy a property, fix it up, live in it for a bit, then sell it for a profit. Many people think that a place like this should qualify as a principal residence and therefore a sale should be sheltered from tax using the PRE. And if not, the profit should at least be taxed as a capital gain, not business income. It seems that, every year, there are court cases in Canada that deal with this issue. Let me share the most recent case, and how the court approached it.

Nathalie Constantin purchased six properties in Quebec over three years – 2006, ’07 and ’08. Ms. Constantin sold the properties shortly after purchasing them. She held the properties for periods ranging from two months to 11 months. The average holding period was nine months.

In this story (see Nathalie Constantin v. The Queen, 2014 TCC 327), the issue was the tax treatment of the profit she realized when she sold the properties. The question was whether to tax the properties as though she were selling capital property that she owned (in which case the profits should be taxed as capital gains), or selling business inventory (in which case the profits should be taxed as business income).

I’ll pause here to mention that, if you hope to use your PRE to shelter income from a tax gain on the sale of a property, it has to be true that the property is a capital property in your hands, and not business inventory. Further, you have to ordinarily inhabit the property in order for it to be counted as a principal residence eligible for the PRE.

Back to the issue of capital property versus business inventory. Think of a tree and fruit analogy. If you were to buy a tree with the intention of growing fruit so that you could sell the fruit to earn income, you could say that the tree is a capital property. On the other hand, if you bought the tree to flip the tree itself for a profit, the tree would be more akin to business inventory. Ms. Constantin argued that it was her intention to keep the properties in order to earn rental income from them. Normally, in this case, a rental property would be considered capital property.

The court, however, disagreed with her. The court shared the criteria that should be looked at when determining whether a profit should be treated as a capital gain, or business income. These criteria were first introduced in the court case Happy Valley Farms Ltd. (1986). Here’s what the court will look at: (1) the nature of the property sold; (2) the length of period of ownership; (3) the frequency and number of similar transactions by the taxpayer; (4) the work expended to make the property more marketable or to attract purchasers; (5) the circumstances responsible for the sale of the property; and (6) the taxpayer’s intention or motive when the property was acquired.

In addition to these criteria, the courts have developed the doctrine of “secondary intention.” That is, even when your main intention was to hold a property as a long-term investment, it might be that you had in mind a possible sale of the property for a profit if your long-term objective couldn’t be achieved. This secondary intention could be enough for a court to say that your profit should be taxed as business income rather than a capital gain. In Ms. Constantin’s case, she would have been content with capital gains treatment, even if she couldn’t claim the PRE. She lost the case.

If you’re going to buy and flip a property for a profit, take a careful look at the criteria the courts – and taxman – will consider when taxing you. If possible, structure your purchase so that you’ll receive capital gains treatment, and perhaps even the PRE.

Source: Globe and Mail

Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.