Real eState
The CRA's pursuit of real estate data goes south of the border – Canadian Accountant
The CRA has become increasingly aggressive in its real estate audits in the last five years, say David Piccolo and Jessica Bishara of TaxChambers LLP in Toronto. |
TORONTO – Canadian residents pay income tax on their worldwide income. In an effort to crack down on unreported offshore income, the Canada Revenue Agency (the “CRA”) recently announced that it will start a cross-border investigation in the United States.
The investigation will look through the past six years’ worth of real estate transactions, from 2014 to 2020, in search of any American “real estate and real property data where a Canadian resident is the owner or party to the purchase, sale or transfer.” CRA will seek information such as municipal addresses, owner names, square footage, sales histories, and property tax assessments.
The CRA said in its notice, titled Bulk United States Real Property Data Re: Canadian Residents, that “[t]his information will enhance the Agency’s ability to administer tax programs and to enhance the various tax Acts in order to protect Canada’s revenue base and to support the Agency’s business and research processes.”
Lost tax revenue in the real estate sector has been a key issue for the CRA. CRA estimates that the amount of unpaid taxes in the real estate sector is in excess of $1 billion. As we discussed in our previous blog post, CRA’s $1 Billion Real Estate Nut: Tough to Crack, the CRA has become increasingly aggressive in its real estate audits in the last five years.
In its endeavour to identify and tax Canadians’ worldwide income, the CRA has authority, through Canada’s tax treaty with the U.S., to seek assistance from our neighbour south of the border.
Canadian taxpayers who are ultimately discovered and reassessed as a result of this upcoming investigation can face significant penalties and interest. For instance, a taxpayer who has knowingly failed to disclose foreign property worth over $100,000 on a T1135 form may be subject to a penalty equal to 5% of the cost of that property, if the form is overdue by more than 24 months. These penalties can accumulate quickly if the failure to file, for example a T1135, occurred for a number of years.
Concerned taxpayers with unreported income may consider proactively disclosing their information to the CRA before any reassessment, through the CRA’s Voluntary Disclosure Program.
That program has two tracks: (1) the General Program and (2) the Limited Program. The General Program provides greater relief from penalties, interest, and criminal prosecution. The Limited Program provides limited relief where there is an element of intentional conduct on the part of the taxpayer. Taxpayers will not face criminal prosecution nor be charged gross negligence penalties, but will be charged other penalties and interest.
Rotman Master of Finance |
The CRA considers several factors in deciding which of the two tracks is suitable, including whether the disclosure was only made after a CRA statement regarding its intended specific focus of compliance (for example, the launch of a compliance project).
Accordingly, now that the CRA’s announcement has been made about its U.S. investigation, voluntary disclosure applications regarding real estate in the U.S. may be caught under the Limited Program.
By David Piccolo, partner, and Jessica Bishara, associate, of TaxChambers LLP in Toronto. Photo by Jonathan Meyer on Unsplash.
Real eState
The real estate sector's unique view of 2024 — and what's to come – Yahoo Finance
This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Despite a rough few days for the S&P 500, which is still comfortably in the green this year (up 6%), one sector of the stock market is feeling more pain than the rest.
The perception that rates might stay higher for longer is hammering the real estate sector, even as debate rages about how many times — if any — the Federal Reserve will cut rates this year.
The group is far and away the worst performer in the S&P 500 for 2024, down more than 10%. The bulk of those declines have come in the past two weeks, as Treasury yields have climbed to their highest level since November and investors traverse the acceptance phase that the hoped-for cuts are not on their way.
Now investors are faced with the question of whether to buy the dip or, to quote another market cliché, risk trying to catch a falling knife.
One real estate investor said the rent indicators she’s seeing in real time are encouraging on the inflation front. That’s in contrast to the much-criticized rental barometers that the Fed relies on.
“If you take into account real-time shelter costs, it’s much lower than what’s in the prints,” Uma Moriarity, senior investment strategist at CenterSquare, told Yahoo Finance. “We think inflation is trending in the right direction.”
That’s why she’s still confident in three rate cuts this year — a view, of course, that the market has been moving away from. It’s also why she’s still confident in real estate. That, plus the fact that stocks are relatively cheap.
Read more: What the Fed rate decision means for loans and mortgages
The reasons that real estate stocks suffer when rates are on the rise are twofold. First off, the companies tend to carry a lot of debt, and as rates go higher, it becomes more difficult to service or refinance that debt. Secondly, with relatively high dividend yields, the stocks compete with instruments like money market funds for investing dollars.
It’s traditionally been tough for real estate stocks to rally in the face of rising rates. But if Moriarty — and Citigroup — are right, they might not be rising for as long as the broader market anticipates.
Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9 a.m.-11 a.m. ET. Follow her on Twitter @juleshyman, and read her other stories.
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from Yahoo Finance
Real eState
Celebrity real estate agent Mauricio Umansky explains when housing prices will come down – Fox Business
Real eState
Real Estate Stocks Fall As Mortgage Rates Rise To 4-Month Highs: 'Inflation Is Proving Tougher To Bring D – Benzinga
Real estate stocks slid at Wednesday’s market open, weighed down by the latest disappointing data on housing starts and a spike in mortgage rates, darkening the outlook for the sector.
By 9:00 a.m. EST, the Real Estate Select Sector SPDR Fund XLRE had dropped by 0.3%. This marked its fourth consecutive day of losses and set a course for its lowest close since the end of November 2023.
The fund has also slipped below its 200-day moving average, a critical long-term benchmark, signaling that investor sentiment has turned negative.
The average interest rate for 30-year fixed-rate mortgages with loan balances up to $766,550 climbed by 12 basis points to 7.13% for the week ending Apr. 12, 2024, according to the latest figures from the Mortgage Bankers Association. This rate is the highest recorded since early December.
On Wednesday, the yield on a 30-year Treasury bond, a key benchmark for long-term mortgage rates, traded at 4.75%, at the highest since mid-November 2023, as Fed Chair Powell admitted that there has been a lack of progress in the disinflation trend.
Chart: Real Estate Stocks Fall Below Key Long-Term Moving Average As Inflation Bites Again
Weaknesses In Multifamily Segment Continue
Joel Kan, MBA’s Vice President and Deputy Chief Economist, explained the rise in rates, stating, “Rates increased for the second consecutive week, driven by incoming data indicating that the economy remains strong and inflation is proving tougher to bring down.”
Despite the uptick in mortgage rates, there was a 3.3% week-over-week increase in the Market Composite Index, which measures mortgage loan application volume.
Kan further noted, “Application activity picked up, possibly as some borrowers decided to act in case rates continue to rise. Purchase applications were the primary driver of this increase, although they are still about 10% lower than last year’s levels. There was a slight uptick in refinance applications, mainly due to a 3% rise in conventional applications.”
Chart: US 30-Year Mortgage Rates Rose To The Highest Level Since Late November
The real estate market’s challenges are linked to affordability and a shrinking availability as the supply of new homes falls.
Andrew Foran, an economist at Toronto Dominion Securities, commented on the trend in home building, “Homebuilding activity moderated in March as weakness in the multifamily segment persisted and the single-family segment gave back most of its considerable gain from the prior month.”
Data revealed a 14.7% month-over-month decline in housing starts in March, with the figures dropping to 1.32 million annualized units, significantly below the anticipated 1.49 million.
Both the single-family and multifamily sectors experienced declines, with single-family starts down by 12.4% (or 145,000 units) and multifamily starts plummeting by 21.7% (or 83,000 units). This retreat in multifamily starts marked the lowest level since April 2020.
Additionally, residential permits decreased more than expected in March, falling by 4.3% month-over-month to 1.46 million annualized units. This included a 5.7% drop in single-family permits—the first decline in fifteen months—and a 1.2% reduction in multifamily permits.
Rising & Falling
The weakest performers among real estate stocks with a market cap of at least $1 billion on Wednesday were:
Name | 1-day %chg |
---|---|
Prologis, Inc. PLD | -6.55% |
First Industrial Realty Trust, Inc. FR | -3.33% |
STAG Industrial, Inc. STAG | -2.89% |
EastGroup Properties, Inc. EGP | -2.89% |
Rexford Industrial Realty, Inc. REXR | -2.35% |
Those showing the highest gains were:
Name | 1-day %chg |
---|---|
SL Green Realty Corp. SLG | 3.18% |
Opendoor Technologies Inc. OPEN | 2.55% |
Medical Properties Trust, Inc. MPW | 2.49% |
eXp World Holdings, Inc. EXPI | 2.32% |
Vornado Realty Trust VNO | 2.25% |
Now Read: Best REITs to Buy in April
Image: Midjourney
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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