Sale of a Property

Sukhanoop Dhillon CPA Discusses the Tax Implications When it Comes to the Sale of a Property.

12 February 2024

Determining the Tax Treatment of the Property

  • Is the property considered income or capital?
  • Income is taxed on the full gain, while capital is taxed on half of the gain.

Factors to Consider

  • Intention: What was your intention for the property?
  • Feasibility: Was your intention for the property feasible?
  • Extent of carrying out intention: Did you follow through with your plans for the property?
  • Geographical location: Does the location align with your intention?
  • Nature of profession: Does your profession make it plausible for you to deal in real estate?
  • Length of ownership: How long did you own the property?
  • Surrounding individuals in real estate: Do people around you deal in real estate?
  • Factors motivating the sale: Consider external factors that influenced the decision to sell.
  • Previous Real Estate Dealings: How often have you sold real estate previously?

Calculation of Profit or Loss

  • Capital Property: Proceeds - Adjusted Cost Basis (ACB) - Outlays = Gain
  • Business Property: Sale Price - Purchase Price - Expenses to Sell = Gain

Principal Residence Exemption

  • Live in the property to claim exemption against the gain.
  • Exemption calculation: (Years lived + 1) / Years Owned
  • Must meet qualification criteria.

Rental Property and Business Property

  • Rental property gain is calculated as a capital gain.
  • Flexibility in calculating gain if the property was previously a principal residence or rental property.
  • Business property gain can be deferred by purchasing another business property.

Foreign Property

  • Treatment can depend on the country's tax treaty with Canada.
  • The cost of property is its fair market value on the day of immigration for new immigrants.

Farm and Fishing Properties

  • Lifetime capital gains exemption can be claimed for these properties.

Planning for Property Sale

  • Use capital gains reserve to defer gain if money is received over a specified period of time.

Note: This summary is a high-level overview and there are many variables to consider in each situation.