A developer purchases land for $1,000,000, builds a home for $800,000, and sells it for $2,200,000. If GST/HST of $286,000 was collected from the buyer, what is the developer's taxable income from this transaction?
Correct Answer
B) $400,000 as business income
A developer who builds and sells as part of its business earns business income, not a capital gain. The profit is $2,200,000 - ($1,000,000 + $800,000) = $400,000 business income, fully included in income. The $286,000 of GST/HST collected belongs to the government and is remitted, so it is not part of the developer's income.
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Previous Question
A developer purchases a property for $2,000,000 in Alberta, subdivides it, and sells individual lots. The total sales revenue is $3,500,000, with development costs of $800,000. How will this transaction likely be taxed?
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A buyer who is not a first-time home buyer signed an agreement in June 2025 to buy a new condominium unit in Ontario from a builder for $500,000 before tax, as a primary residence. What is the HST, and what new housing rebate is available?