Humber/Ontario Real Estate Course 2 Exam Practice

Which statement is accurate regarding potential tax implications for a buyer?

1. HST is only applicable to new home purchases, not resales.

2. A foreign buyer's tax applies to all properties purchased by a non-resident of Canada.

3. Under certain circumstances, a buyer can be responsible for capital gains tax incurred by a seller who is a non-resident of Canada.

4. Most tax questions should be directed to an accounting expert, but salespersons can provide advice as well.

5. Property taxes are always included in the purchase price.

6. First-time homebuyers are exempt from all taxes.

The correct answer is: Under certain circumstances, a buyer can be responsible for capital gains tax incurred by a seller who is a non-resident of Canada.

Option C is accurate because under certain circumstances, a buyer can be responsible for capital gains tax incurred by a seller who is a non-resident of Canada. This situation usually arises when a non-resident seller does not pay the required capital gains tax upon selling the property. In such cases, the responsibility for paying the outstanding tax falls on the buyer to ensure compliance with the tax laws. Options A, B, D, E, and F are inaccurate: A. This statement is incorrect because HST (Harmonized Sales Tax) is applicable to both new home purchases and resales in some cases, depending on the circumstances surrounding the sale. B. The statement is incorrect because the foreign buyer's tax does not apply to all properties purchased by a non-resident of Canada. The tax is specific to certain provinces and municipalities and may not be applicable everywhere. D. While seeking advice from an accounting expert is recommended for specific tax questions, real estate salespersons can provide general information on potential tax implications for buyers. E. Property taxes are typically not included in the purchase price of a property. They are ongoing expenses that the buyer will be responsible for paying after acquiring the property. F. First-time homebuyers are not exempt from all taxes; they may be eligible for certain tax credits or rebates, but they are not exempt from all taxes related to purchasing a property.