Sarah owns two properties: her principal residence worth $600,000 (purchased for $400,000) and a cottage worth $300,000 (purchased for $200,000). If she sells both in the same year, what is her taxable capital gain?
Correct Answer
C) $50,000
The principal residence has a $200,000 capital gain but is exempt from tax. The cottage has a $100,000 capital gain, and since only 50% of capital gains are taxable, $50,000 would be added to her taxable income. Only one property per family can claim the principal residence exemption per year.
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