A client sells their principal residence for $800,000 after purchasing it for $500,000. How much of the $300,000 capital gain is subject to tax?
Correct Answer
D) $0 - principal residence exemption applies
The principal residence exemption eliminates capital gains tax on the sale of a taxpayer's principal residence, provided it was designated as such for all years of ownership.
Why This Is the Correct Answer
Under the Income Tax Act, the principal residence exemption completely eliminates capital gains tax on the sale of a taxpayer's principal residence. When a property qualifies as a principal residence for all years of ownership, the entire capital gain is exempt from taxation. In this case, the full $300,000 gain is protected by this exemption, resulting in zero taxable capital gain.
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- → In Ontario, what is the standard Land Transfer Tax rate for a residential property purchase of $400,000?
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- → A buyer purchasing a $2 million commercial property in Alberta asks what provincial land transfer tax will be due on closing. What is the correct response?
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- → Under Ontario's Assessment Act, how often does the default schedule call for property to be revalued for assessment purposes?
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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?
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