From Georgina Tollstam, “Deposit Forfeited to Non-Resident” Canadian Tax Highlights 23:6 (June 2015):
An internal technical interpretation (2013-0479861I7, March 16, 2015) confirms that if a Canadian taxpayer purchases real property located in Canada from a non-resident vendor and the sales agreement is cancelled, a deposit forfeited by the taxpayer to the non-resident vendor is not taxable Canadian property (TCP). As a result, section 116 does not apply to the forfeited deposit. However, the CRA also says that the non-resident vendor has disposed of a right under a contract and that right may be taxable as either Canadian-source income or a capital gain.
