A client owns a rental property in Calgary that they purchased for $400,000 and sold for $550,000. They claimed $50,000 in depreciation over the years. What is their taxable capital gain?
Correct Answer
D) $75,000
The capital gain is $150,000 ($550,000 - $400,000), but only 50% is taxable, making the taxable capital gain $75,000. The depreciation claimed will be recaptured as income, but this is separate from the capital gains calculation.
Why This Is the Correct Answer
The capital gain is calculated as sale price minus purchase price: $550,000 - $400,000 = $150,000. In Canada, only 50% of capital gains are taxable, so the taxable capital gain is $150,000 × 50% = $75,000. The $50,000 depreciation claimed is subject to recapture as regular income, but this is calculated separately from the capital gains tax and doesn't affect the capital gain calculation itself.
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