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Capital Gains Tax Canada

When capital property is disposed of the gain or loss on that sale is subject to the capital gains tax Canada inclusion rate of 50%. Essentially that means half of any gains or losses on capital property disposition are reported as income. The capital gains tax in Canada was adopted in 1972 at a inclusion rate of 50%.

If an asset is for personal use it will be classified as Personal Use Property (PUP). Examples of PUP are your principal residence, boats, cars, and cottages. Only capital gains can be claimed on PUP, not capital losses, and some PUP are also Listed Personal Property (LPP). More details on PUP and LPP can be found here.

What is capital property?
In a nutshell, capital property is any property that if sold would result in a capital gain or loss. For individuals, common examples are investments in stocks, bonds and mutual funds. Cottages and rental properties are also capital property. When any of these items are disposed of they will either be sold at higher or lower amount than the purchase price. If the selling price is higher you have a capital gain, lower, a capital loss.

Does capital property have to be sold to incur a capital gain or loss?
Capital property has to be disposed of, which in many cases is actually sold but there are times when property is considered sold. A few examples of considered sold are gifting of property, the property owner dies, the property is stolen, and securities in your name are converted.

What is the Capital Gains Tax Canada Inclusion Rate?
Capital gains or losses are multiplied by the inclusion rate to determine the taxable capital gain or allowable capital loss. At present the inclusion rate is 50%, unchanged since 2000.

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