An investor sells a rental property for $600,000 that they purchased for $400,000. They claimed $50,000 in depreciation over the years. What is their taxable capital gain?
Correct Answer
D) $100,000
The capital gain is $200,000 ($600,000 - $400,000), but only 50% of capital gains are taxable in Canada, resulting in a taxable capital gain of $100,000. The depreciation claimed creates a separate recapture of depreciation issue that is fully taxable as income.
Why This Is the Correct Answer
The capital gain is $200,000 ($600,000 sale price - $400,000 purchase price). In Canada, only 50% of capital gains are subject to tax, making the taxable capital gain $100,000. The $50,000 depreciation claimed creates a separate recapture of depreciation that is fully taxable as ordinary income, but this doesn't affect the capital gains calculation.
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