Humber/Ontario Real Estate Course 2 Exam Practice

Which of the following is correct concerning tax implications for the property owned by a non-resident seller?

1. A non-residency declaration can be signed by the buyer.

2. Non-residents are not subject to capital gains tax.

3. The Income Tax Act holds the buyer responsible if the seller does not pay owed taxes.

4. The buyer has no liability regarding taxes.

5. Local taxes are not applicable to non-residents.

6. The seller must pay taxes directly to the buyer before the sale.

The correct answer is: The Income Tax Act holds the buyer responsible if the seller does not pay owed taxes.

The correct answer is C because according to the Income Tax Act, if the seller is a non-resident and has tax obligations in Canada, the buyer can be held responsible if the seller does not fulfill their tax obligations. This means that the buyer may be liable for any unpaid taxes on the property owned by the non-resident seller. It is crucial for buyers to be aware of this potential liability when purchasing property from non-resident sellers to avoid any unexpected financial repercussions. Options A, B, D, E, and F are incorrect: A. A non-residency declaration typically does not involve the buyer but is a form that the non-resident seller would have to fill out to declare their tax status in Canada. B. Non-residents are subject to capital gains tax in Canada when selling a property, so they are not exempt from this tax. D. While the buyer may not be directly responsible for all taxes, they can be held liable under certain circumstances, as explained in option C. E. Non-residents are still subject to local property taxes in Ontario. F. Taxes are typically paid by the seller and not directly to the buyer before the sale.