A taxpayer bought a city home and a cottage for $400,000 each in the same year and has owned both ever since. Both qualify as a principal residence for every year. The city home is now worth $800,000 and the cottage $600,000, and both are sold this year. Which designation minimizes tax?
Correct Answer
B) Designate the city home, as it has the larger gain
The city home's gain is $800,000 - $400,000 = $400,000 and the cottage's is $600,000 - $400,000 = $200,000. Because both were owned for the same years, designating the city home shelters the larger gain and leaves only the cottage's $200,000 gain exposed (aside from the one extra year the formula allows).
Why This Is the Correct Answer
Designating the city home for the ownership years exempts its $400,000 gain. The cottage's $200,000 gain is then taxable, apart from the small share the one-plus rule can shelter. Designating the cottage instead would leave the larger $400,000 gain taxable.
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A real estate investor buys a new condominium unit directly from a builder in Ontario for $450,000, intending to rent it to tenants. What GST/HST applies to the purchase?
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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?