REALWorld Law

Taxes

Taxation of disposals

What taxes are payable on the sale of real estate and can these be reduced or offset in any way?

Canada

Canada

Canada taxes one-half of capital gains. A taxpayer that realizes a gain on the disposition of Canadian real property held as capital property will be required to include one-half of the gain (the taxable capital gain) in income and generally be subject to tax at applicable rates. For this purpose a capital gain is computed as the proceeds of disposition, minus the ACB of the property and reasonable costs of disposition. If the real property includes depreciable property – for example a building – that has been depreciated for tax purposes, any gain attributable to the building up to the total previously-deducted net tax depreciation will be fully taxable.

The tax rates and rules described under ‘Recurring Taxation – Ongoing Taxation – Income Tax’ will generally apply to the taxable capital gain included in the taxpayer’s income.

One hundred per cent of any realized gain on the disposition of real property held as a trading asset or acquired in the course of an adventure or concern in the nature of trade will normally be taxable at applicable rates.