An investor purchases a rental property for $600,000 and sells it three years later for $750,000. What amount is added to their taxable income?
Correct Answer
C) $75,000
For investment properties, 50% of the capital gain ($150,000 × 50% = $75,000) is included in taxable income. The principal residence exemption does not apply to rental properties.
Why This Is the Correct Answer
In Canada, when an investment property is sold for a capital gain, only 50% of the gain is included in taxable income. The capital gain is $750,000 - $600,000 = $150,000. Since this is a rental property (not a principal residence), the full capital gains tax applies. Therefore, 50% of $150,000 = $75,000 is added to taxable income. This is the standard capital gains inclusion rate for investment properties.
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