A married couple owns two properties: their principal residence worth $800,000 and a cottage worth $400,000. They have designated their principal residence appropriately. If they sell both properties in the same year for gains of $200,000 and $100,000 respectively, what is their total taxable capital gain?
Correct Answer
B) $50,000
The principal residence exemption eliminates tax on the $200,000 gain from their main home. However, the $100,000 gain from the cottage is subject to capital gains tax, with 50% ($50,000) being taxable. A family unit can only designate one property as their principal residence per year.
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