HERBERT & COMPANY
Chartered Professional Accountant
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Capital Gains & Losses
A capital gain or capital loss occurs when you sell or dispose of property such as mutual funds, shares or real estate. You are taxed on only 50% of the gains which you make. If the total of your gains for the year is more than the total of your losses you must include 50% of the difference in your income.
If, however, the total of your losses for the year is greater than the total of your gains, you cannot claim a deduction for the difference. The loss may be carried back if you have claimed capital gains in the previous three years, or you may carry the loss forward indefinitely to reduce capital gains which occur in future years. If a taxpayer has unused capital losses when he or she passes away, these losses can be deducted from other income in the year of death.
There is currently a lifetime exemption of $913,630 available on capital gains resulting from the sale of shares in a qualified small business corporation. This means that you can have a taxable capital gain of up to $913,630 from the sale of shares in a qualified small business without having to pay tax on the gain.
The lifetime exemption on the sale of qualified farm or qualified fishing property is currently $1,000,000. This means that you can have a taxable capital gain of up to $1,000,000 from the sale of qualified farm or fishing property without having to pay tax on the gain.
Generally, your principal residence is exempt from capital gains. However, you still need to report the sale to Canada Revenue Agency on your personal tax return in the year of sale. If your residence was used as a rental property you may have to pay tax on a portion of the gain when you sell it.
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