Humber/Ontario Real Estate Course 3 Exam Practice

Regarding tax implications, which statement is accurate for a property purchase?

1. HST applies only to new homes.

2. A foreign buyer's tax is applicable to all properties purchased by non-residents.

3. Buyers may be responsible for capital gains tax if the seller is a non-resident.

4. Tax questions should always be answered by the salesperson.

5. Land transfer tax applies only to properties above a certain value.

6. Buyers may have tax exemptions for their primary residence.

The correct answer is: Buyers may be responsible for capital gains tax if the seller is a non-resident.

The correct statement relates to the tax implications associated with property purchases and the responsibility of buyers concerning capital gains tax when the seller is a non-resident. Under Canadian tax law, when a non-resident sells a property, the seller may be subject to capital gains tax on the profit realized from the sale. In such cases, buyers of the property could be held responsible for ensuring the capital gains tax is settled. This is crucial for buyers to understand, as they need to account for potential tax liabilities related to the non-resident seller’s obligations. In contrast, other options do have inaccuracies or additional considerations. For example, while it might seem that HST applies only to new homes, in some instances, it can also impact major renovations or properties under certain conditions. The foreign buyer's tax does not necessarily apply to all properties but is specific to residential properties in designated areas. Taxation questions should ideally be directed to qualified tax professionals rather than relying solely on real estate salespersons. Land transfer tax does apply to all property transactions, regardless of the value, but specific exemptions might exist. Finally, while primary residences indeed have tax exemptions, this is not a universal aspect of all property purchases and is context-dependent. Understanding these nuances helps buyers navigate the complexities