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?
Correct Answer
B) 50% of the capital gain
In Canada, 50% of capital gains are taxable and must be included in your income for tax purposes. Sarah's capital gain is $150,000, so $75,000 (50%) would be added to her taxable income and taxed at her marginal tax rate.
Why This Is the Correct Answer
Under Canadian tax law, capital gains are subject to a 50% inclusion rate, meaning only half of the capital gain is taxable. This rule applies to all capital property including rental real estate. Sarah's capital gain of $150,000 ($750,000 - $600,000) results in $75,000 being added to her taxable income. The 50% inclusion rate is a fundamental principle of Canadian taxation that has remained consistent for many years.
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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 gain is subject to capital gains tax?
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Sarah purchased a rental property in British Columbia for $800,000 and sold it three years later for $950,000. What amount would be subject to capital gains tax?