A real estate investor owns a rental property that they purchased 5 years ago for $300,000 and sells for $450,000. What portion of the $150,000 capital gain is subject to income tax?
Correct Answer
B) $75,000
For investment properties, 50% of the capital gain is included in taxable income. Therefore, 50% of the $150,000 gain equals $75,000 that must be added to the investor's income for tax purposes. Investment properties do not qualify for the principal residence exemption.
Why This Is the Correct Answer
Under Canadian tax law, only 50% of capital gains on investment properties are included in taxable income. This is known as the taxable capital gain. The investor realized a $150,000 capital gain ($450,000 - $300,000). Therefore, 50% × $150,000 = $75,000 is the taxable portion that must be added to their income for tax purposes.
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A real estate investor owns a rental property that generates $2,000 monthly rent. Which of the following expenses can be deducted for tax purposes?
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