A homeowner sells their principal residence that they have lived in for 10 years. What is the capital gains tax treatment?
Correct Answer
C) The gain is completely exempt from tax
Under the principal residence exemption, the entire capital gain from the sale of a principal residence is exempt from tax if the property qualified as the owner's principal residence for all years of ownership. This is one of the most significant tax benefits for Canadian homeowners.
Why This Is the Correct Answer
Under Canada's principal residence exemption, the entire capital gain from selling a principal residence is completely exempt from taxation when the property qualified as the owner's principal residence for all years of ownership. Since the homeowner lived in the property for 10 years as their principal residence, the full gain is tax-free. This exemption is one of the most valuable tax benefits available to Canadian homeowners and applies regardless of the gain amount.
Why the Other Options Are Wrong
Memory Technique
Exam Tip for Real Estate Taxation
Common Mistakes to Avoid on Real Estate Taxation Questions
More Real Estate Taxation Questions
In Alberta, property taxes are primarily used to fund which level of government services?
Does Alberta charge a provincial land transfer tax when purchasing real estate?
In Ontario, who is responsible for paying the land transfer tax when a property is purchased?
A Toronto resident owns two properties: their principal residence worth $800,000 (purchased for $400,000) and a cottage worth $500,000 (purchased for $300,000). If they sell both properties in the same year, what is their total taxable capital gain?
What is the primary purpose of municipal property taxes in Canada?
- → In Ontario, what is the standard Land Transfer Tax rate for a residential property purchase of $400,000?
- → Which of the following best describes when land transfer tax is typically paid?
- → A first-time buyer purchases a $450,000 home in Ottawa, outside the City of Toronto. Which land transfer tax relief can they claim?
- → Which type of real estate transaction is generally exempt from GST/HST in Canada?
- → A first-time home buyer signs an agreement in May 2026 to buy a newly built home in Ontario from a builder for $450,000 before tax, to live in as a primary residence. If all conditions are met, what is the most HST that can be rebated under the federal and Ontario rebates combined?
- → 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?
- → Under the Income Tax Act, what is the principal residence exemption?
- → Sarah bought an investment property 3 years ago for $400,000 and sells it today for $550,000. What amount will be subject to capital gains tax?
- → Under Ontario's Assessment Act, how often does the default schedule call for property to be revalued for assessment purposes?
- → A developer purchases a property for $2,000,000 in Alberta, subdivides it, and sells individual lots. The total sales revenue is $3,500,000, with development costs of $800,000. How will this transaction likely be taxed?
People Also Study
Real Property Law
60 questions
Contracts & Agreements
60 questions
Agency & Professional Ethics
60 questions
Mortgage & Real Estate Finance
60 questions
Related Study Resources
Helpful Resources
Previous Question
An Ontario homeowner believes the assessed value shown on their property assessment notice is too high. What is their first step to challenge it?
Next Question
A married couple owns two homes: one in Edmonton (purchased 2015) and one in Vancouver (purchased 2020). They want to minimize capital gains tax when selling one property. What should they consider?