Quote:
Originally Posted by Leondros
I was having an interesting discussion with some friends (lawyer, CPA, CFA, and a realtor) and one point brought up was how people are really leveraging their principal residence exemptions as investment tools. Staying in the house on paper for the 6 months required, and then flipping. Family members of large families were doing this with 5 - 6 houses at a time.
We then got to talking about if the government removed the PRE, would that reduce the amount of house speculators in the market? If you remove that portion of buyers of which you could argue is material, would that help remove the speculative aspect. Funny enough, the PRE was implemented in 1971, it was a way to implement capital gains taxes on property and in order to get it through politically the government added the exemption as to not hurt the vast majority of the population.
It was a great discussion with us concluding it would be political suicide to remove today however fast forward 10 years when the voting base has drastically swung and the boomers die out, and it may be possible.
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I could see them implementing a sort of partial removal of the exemption. Either through a sliding scale based on the length of time you lived there (say 100% exemption for over 5 years and then lower amounts if you sell it more quickly), or a maximum exemption (either lifetime maximum, or some sort of rolling period). The latter is what they do in the US.