18 December 2025 External T.I. 2025-1055741E5 - Flipped Property Rules - Multi-unit buildings

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether certain property owned by a taxpayer, or rooms within that property, could be a “flipped property” pursuant to subsection 12(13) of the Act.

Position: Question of fact. The Flipped Property Rules would generally not apply to nursing homes, however may be applicable to rooming houses.

Reasons: While a "flipped property" is limited to a single property containing one housing unit, a rooming house may be a property that is only one housing unit.

XXXXXXXXXX								2025-105574
									Ryan Wallace, CPA

December 18, 2025

Dear XXXXXXXXXX,

Re: Flipped Property Rules – Meaning of Housing Unit

We are writing in response to your email of March 5, 2025, wherein you requested our views on whether certain buildings, or specific rooms within those buildings, could be considered a flipped property as that term is defined in subsection 12(13) of the Income Tax Act (“Act”). More specifically, you asked whether a nursing home or a rooming house could be considered flipped property.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Subsection 12(12) of the Act provides a deeming rule that results in a gain on the disposition of a flipped property being fully taxable as business income. If the disposition of a flipped property would have otherwise resulted in a gain (in the absence of this deeming rule and the principal residence exemption) then throughout the period that the taxpayer owned the flipped property:

• the taxpayer is deemed to carry on a business that is an adventure or concern in the nature of trade with respect to the flipped property;
• the flipped property is deemed to be inventory of the taxpayer's business; and
• the flipped property is deemed not to be capital property of the taxpayer.

Pursuant to subsection 12(13) of the Act, a flipped property of a taxpayer means a property, other than inventory, that is, prior to its disposition, either a housing unit located in Canada or a right to acquire a housing unit located in Canada, and owned or, in the case of a right to acquire, held, by the taxpayer for less than 365 consecutive days prior to its disposition unless it is reasonable to consider that the disposition occurred because of, or in anticipation of, one or more of the exceptions provided under subparagraphs 12(13)(b)(i)-(ix). Additionally, subsection 12(14) of the Act deems a taxpayer’s loss from a business in respect of a flipped property to be nil.

The term “housing unit” is not defined in the Act. In the absence of a definition that assigns a specific technical meaning to the term for purposes of the flipped property rules, we must refer to the common and ordinary meaning of the term, including dictionary definitions. Read together, various definitions allows us to conclude that a housing unit is normally represented by a room, or a group of rooms, used for residential purposes, occupied by a person or group of persons, and which includes a certain number of characteristics such as a kitchen, bathroom, etc.

However, for the purposes of the definition of flipped property, it is our view that the other terms used in the provision, i.e., “property…that is…a housing unit…” restricts the scope of the definition to property that is a single housing unit. As a result, the application of the flipped property rules is limited to property that is only one housing unit (or is a right to acquire such property). For example, a multi-unit apartment building or a mixed commercial and residential building will generally not be considered a flipped property. However, each part of a duplex that has been legally subdivided into two properties could meet the definition provided all other conditions have been met. Whether a property contains more than one housing unit for the purposes of the flipped property definition is ultimately a question of fact. This determination can only be made after a careful review of the relevant facts and circumstances.

Although a nursing home may contain elements of a housing unit (such as a kitchen, bathrooms, etc.), it is our view that a nursing home would generally not be considered a flipped property.

It is a question of fact whether a rooming house could be considered a flipped property. In some instances, a rooming house refers to a house in which individual rooms are rented out rather than the entire property. In these instances, residents typically have a private bedroom but share a kitchen and bathroom facilities. In such cases, we would generally consider the rooming house to be a property that is one housing unit for purposes of the flipped property rules – i.e., it is a room or group of rooms used for residential purposes, occupied by a person or group of persons, with a certain number of elements such as a kitchen, bathroom, etc.

You have also asked whether a rooming house could be subject to the flipped property rules where each bedroom contains items beyond basic furnishings - including a mini fridge, table and basic cooking setup such as a small stove or hot plate. It is our view that such a room would not itself be considered a housing unit. Accordingly, the property would not be considered to have multiple housing units and may be considered a flipped property provided the other conditions of the definition have been met.

We also note that where the deeming rule under subsection 12(12) of the Act does not apply because a property is not considered a flipped property, it would still remain a question of fact whether the disposition of a particular property would give rise to income from a business or a capital gain. For example, if a taxpayer acquired a property with the intention of renovating it and selling it for profit, the related gain (or loss) would likely be on account of income (i.e., business income). Interpretation Bulletin IT-459 (footnote 1) and paragraphs 1 to 6 of Interpretation Bulletin IT-218R (footnote 2) set out the main criteria considered by the courts in determining whether the sale of property gives rise to a capital gain or business income, as well as the CRA's comments on them.

We trust our comments will be of assistance.

Yours truly,

Sarah Springate CPA, CA
Acting Manager
Business and Capital Transaction Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1. CANADA REVENUE AGENCY, Interpretation Bulletin IT-459, "Adventure or Concern in the Nature of Trade,” September 8, 1980.

2. CANADA REVENUE AGENCY, Interpretation Bulletin IT-218R, "Profit, Capital Gains and Losses from the Sale of Real Estate, Including Farmland and Inherited Land and Conversion of Real Estate from Capital Property to Inventory and Vice Versa," September 16, 1986.