Sarah purchased a rental property in British Columbia for $800,000 and sold it three years later for $950,000. What portion of her $150,000 capital gain will be subject to income tax?
Correct Answer
A) $75,000 (50% of the gain)
In Canada, 50% of capital gains are included in taxable income. Since Sarah's capital gain is $150,000, she must include $75,000 (50%) as taxable income on her tax return. Rental properties do not qualify for the principal residence exemption.
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