John purchased a rental property for $300,000 and sold it 5 years later for $450,000. Ignoring selling costs, what amount is added to his taxable income as a taxable capital gain?
Correct Answer
D) $75,000
The capital gain is $450,000 - $300,000 = $150,000. Under Income Tax Act s. 38(a), one-half of a capital gain is the taxable capital gain, so $75,000 is added to John's income and taxed at his marginal rate. A rental property he did not live in cannot be sheltered by the principal residence exemption.
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Previous Question
John owns three properties: his principal residence, a cottage, and a rental property. He sells all three in the same year, realizing gains of $100,000, $80,000, and $60,000 respectively. What is his total taxable capital gain?
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Maria inherited a property when her grandmother died in 2020; its fair market value immediately before the death was $600,000. Her grandmother had bought it for $200,000 in 1995. Maria sells it in 2024 for $750,000. For capital gains purposes, what is Maria's adjusted cost base?