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Basic calculation for cap gain/loss?
proceeds-[ACB-expenses and outlays]
how is “taxable cap gains” calculate for income tax purposes?
taxable cap gains=(capital gain @50%)-(allowable capital losses @50%)
3 conditions that must be met for a capital loss to be denied due to the superficial loss rule?
dispose of property resulting in capital loss
the taxpayer/affiliated person re-acquires the same or identical property within 30 days
the taxpayer still owns property after 30 days
what happens to capital loss that is denied due to superficial loss rule?
the loss is considered superficial loss, and therefore cannot be deducted.
the capital loss on the shares that were NOT reacquired is allowable
under what conditions can a taxpayer claim a capital gain reserve?
a taxpayer who sells capital property and realizes a capital gain can claim a reserve if part of the proceeds are payable AFTER the year of the sale
When can capital gain reserve not be claimed?
taxpayer is not a resident of Canada
purchaser was a corporation controlled by the vendor
the purchaser was a partnership in which the vendor held controlling interest
2 ways to calc max capital gains reserve a taxpayer can claim in a year?
lesser of:
gain * (proceeds not received by year end/total proceeds)
gain*20%*(4-years held)
what is the rule regarding capital gains tax on the sale of a principle residence of canada?
dont have to pay taxes on capital gain, each family is entitled to 1 expemption per household
what are the two main types of personal property for tax purposes, and how are capital losses treated for each?
PUP- capital losses are denied, minimum deemed proceeds and ACB of $1,000
LPP-Capital losses on LPP can only be used against LPP gains, unused gains can be carried forward, min deemed proceeds and ACB of $1,000
what is the rule for change in use of property? What is a common example?
it is considered a demmed disposition at its FMV on the date of change
common example is principal residence-rental property
what are the common income tax implications of changing the use of a principal residence to a rental property?
normally would trigger a deemed disposition and potentially create a capital gain.
however, if an election is made the rule can be avoid,
the taxpayer must
the taxpayer cannot deduct CCA on the rental property
If CCA is deducted, the CRA will consider the election to be rescinded and the change in use rules will apply in the year the taxpayer deducts CCA on their tax return.
What is the general idea behind the deferral on replacement property?
Postpone Tax on Gains
If you sell, lose, or damage property, you might have a capital gain or recapture.
Instead of paying tax right away, you can defer it by reinvesting in a new property.
How It Works
The tax cost of the new property is reduced by the deferred gain.
This means you don’t pay tax now, but may pay later when selling the new property.
Key Considerations
Optional election – not always beneficial (e.g., if you have losses to use).
Must elect in the year you acquire the replacement property
What is the time limit for replacing property in the case of an involuntary disposition to qualify for a deferral of capital gains or recapture?
For involuntary dispositions (e.g., theft, destruction, expropriation), the replacement must occur within 24 months after the end of the year
What is the time limit for replacing real property in the case of a voluntary disposition (relocation) to qualify for a deferral of capital gains or recapture?
12 months after the end of the year
