There are numerous reasons for the CRA to want to know the true market value of a property. However, all reasons are geared around collecting tax revenue. The main reason revolves around capital gains.
A capital gain is the increase in market value of a property. if a property is rented and being used as an investment vehicle the Canada Revenue Agency (CRA) will want to tax any increase in value from when the investment property was purchased to when the property is sold. If the use of the property is being changed from “owner occupied” to “tenant occupied” the CRA will want to know the value as of the “change of use” date. This is to ensure that the homeowner is not taxed on the full amount of the capital gain, only the amount attributed to the time the home was being used as an investment. If the change of use date has already passed, the appraiser can complete a “retrospective appraisal”. A typical situation is this:
Example: John buys an apartment in 2015 for $500,000 and Sue buys a townhouse in 2016 for $700,000. They both meet and fall in love and get married and want to buy their forever home in 2018. They have saved enough for a down payment and are able to rent out their previous homes in January 2018 and move into their new home. In 2020, they decide to both sell their rentals and both sell their units for $700,000 and $900,000 respectively. The CRA will try and tax them on the full appreciation which is $200,000 per property. However, if they get an appraisal done as of January 2018, as opposed to using the sale price from 2015/2016, they are likely to get an appraised value of $600,000 and $800,000 respectively. That means that John and Sue will only be taxed on a $100,000 capital gain each, and not on the full $200,000 increase in value.