A BC resident sells an investment property they owned for 3 years, realizing a $100,000 capital gain. How much of this gain is subject to income tax?
Correct Answer
B) $50,000
Under the Income Tax Act, only 50% of capital gains are included in taxable income. Therefore, $50,000 of the $100,000 gain would be added to the taxpayer's income and taxed at their marginal tax rate.
Why This Is the Correct Answer
Under the Income Tax Act, capital gains are subject to a 50% inclusion rate for tax purposes. This means only half of any capital gain is added to taxable income. For a $100,000 capital gain, exactly $50,000 (50% × $100,000) becomes taxable income that will be taxed at the individual's marginal tax rate. This 50% inclusion rate has been the standard federal rule for capital gains taxation.
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