Sarah purchased a rental property in British Columbia for $600,000 and sold it three years later for $750,000. What portion of her gain is subject to capital gains tax?
Correct Answer
B) $75,000
In Canada, 50% of capital gains are taxable. Sarah's capital gain is $150,000 ($750,000 - $600,000), so the taxable portion is $75,000. This amount is added to her other income and taxed at her marginal tax rate.
Why This Is the Correct Answer
Under Canadian tax law, only 50% of capital gains are subject to taxation. Sarah's total capital gain is $150,000 ($750,000 sale price minus $600,000 purchase price). The taxable portion is therefore $150,000 × 50% = $75,000. This taxable capital gain is then added to her other income and taxed at her marginal tax rate.
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Previous Question
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?
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Sarah purchased a rental property in British Columbia for $600,000 and sold it three years later for $750,000. What portion of her capital gain is taxable?