# Capital Gains Tax on Revenue Property in BC



## elykser (Mar 2, 2012)

Hello everyone!
Just sold a revenue property in BC and had some questions. 
How is capital gains tax calculated?
My understanding is that only 50% of the gain (profit?) is taxable. So, is that the price we sold it for minus the price we bought it for divided by two?
Will we owe what ever my federal tax rate is plus whatever my provincial tax rate is on that 50%?

E.g. 
$300,000 (what we sold it for) - $200,000 (what we bought it for) = $100,000 (capital gain)
$100,000 * 0.50 = $50,000 (taxable amount) 
$50,000 * 0.15 (Fed. tax rate) = $7,500
$50,000 * 0.0506 (Prov. tax rate) = $2,530
$7,500 + $2,530 = $10,030

Is this basically right?
Any other factors come into play?

Edit: 
My wife is on the title as well and will make very little employment income. Can we take advantage of this?

Update: Talked to an accountant about our situation. Told her that when we rented out our apartment, we moved into a rental. She said the sale of our apartment is exempt from capital gains tax (for four years) because we didn't move into another property that we owned. So, no need to report the sale as income!


----------



## heyjude (May 16, 2009)

Did you claim the capital cost allowance while you owned the property? My understanding is that this will be recaptured when you sell. 

http://www.taxtips.ca/personaltax/propertyrental/rentalexpenses.htm


----------



## FrugalTrader (Oct 13, 2008)

Also note that if you did any renovations, the cost would be added to your adjusted cost base. For example, you purchased for $200k, if you put $50k into the property for renovations, then your new ACB is $250k.


----------



## Eclectic12 (Oct 20, 2010)

elykser said:


> Hello everyone!
> Just sold a revenue property in BC and had some questions.
> How is capital gains tax calculated?


I'm not sure the Fed/Prov. rates quoted will match up with what your tax return does.

The CG is the same as selling a stock ... so it will be added into whatever other income one is reporting (ex. employment, investments, interest etc.). This may change the rates (same as having a $2K CG from selling a stock on top of $80K of other income versus the same $2K CG added to $30K of income).

The "Proceeds - Cost" will go on Schedule 3, Part 4 "Real Estate, depreciable properties and other properties". The total CG or CL will be on line 138. After adding any other sources of CG and deducting any available deductions, the total CG across all the categories will be on line 197.

This is then multiplied by 50% to end up with line 199 "Total CG (or net CL) in 201#". This amount is then transferred to the T1 form, line 127. This is in the section totaling all sources of income (which may change the tax rates for those particular dollars).




elykser said:


> Will we owe what ever my federal tax rate is plus whatever my provincial tax rate is on that 50%?


Depends on what else is happening for the rest of the tax return. 

Where one has a combination of employment income/investment income, RRSP deductions and charitable donations to end up with a $10K refund, adding in the CG may mean a small tax bill. For example, a $10,000 refund before the CG then adding in the CG where the added tax is $10,050 will mean a $50 tax bill.

Where the numbers add up to say a $1,000 tax bill *before* the CG is added in, the tax bill will be larger. That would be the the $1K + $10,050 for a total tax bill of $11,050.


The one good thing is that where the property was sold in 2016, a broad range of ways to reduce any taxes owing is still available (ex. charitiable donations are still on the table, RRSP contributions etc.).


Something else to check is when net tax owing is over a certain amount, installments may be required ...
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/nstlmnts/wh-eng.html


Cheers


----------



## elykser (Mar 2, 2012)

FrugalTrader said:


> Also note that if you did any renovations, the cost would be added to your adjusted cost base. For example, you purchased for $200k, if you put $50k into the property for renovations, then your new ACB is $250k.


Very good to know!


----------



## elykser (Mar 2, 2012)

heyjude said:


> Did you claim the capital cost allowance while you owned the property? My understanding is that this will be recaptured when you sell.
> 
> http://www.taxtips.ca/personaltax/propertyrental/rentalexpenses.htm


No, but thanks for the heads up!


----------



## AltaRed (Jun 8, 2009)

elykser said:


> My wife is on the title as well and will make very little employment income. Can we take advantage of this?


Firstly, I am very surprised you are asking such basic questions on an investment property. Surely you would have the basic tax rules sorted out using after tax cash flow analysis when making the investment to know: 1) what CCA does, or does not, do for you, 2) what is an annual deductible operating cost, 3) what is a capital improvement that is not deductible as an operating cost but does add to ACB, 4) who paid (each of you and your wife) how much of the initial investment, 5) whether you and your wife have been declaring income in proportion to your respective investments and proportionate share of deductions on each year's tax returns.

Not sure where you are going with your question with respect to your wife on title. Her share of capital gains, etc. is the proportionate share of capital she contributed to the property. There is no wiggle room here. It is simple math based on the paper trail you would have established from the day you/her purchased the property.


----------



## elykser (Mar 2, 2012)

AltaRed said:


> Firstly, I am very surprised you are asking such basic questions on an investment property. Surely you would have the basic tax rules sorted out using after tax cash flow analysis when making the investment to know: 1) what CCA does, or does not, do for you, 2) what is an annual deductible operating cost, 3) what is a capital improvement that is not deductible as an operating cost but does add to ACB, 4) who paid (each of you and your wife) how much of the initial investment, 5) whether you and your wife have been declaring income in proportion to your respective investments and proportionate share of deductions on each year's tax returns.
> 
> Not sure where you are going with your question with respect to your wife on title. Her share of capital gains, etc. is the proportionate share of capital she contributed to the property. There is no wiggle room here. It is simple math based on the paper trail you would have established from the day you/her purchased the property.


Thank you for your insight!

These were absolutely new concepts and terms to me before posting my question. If I had known the answer, I wouldn't have posted and thus, wouldn't have surprised you. I admit to learning as I go along.

Do you know what outlays and expenses incurred to sell the property are subtracted from the proceeds of disposition? Do they include the realtor's commission and lawyer's fees? I thought it was just the PST on the realtor's commission.


----------



## AltaRed (Jun 8, 2009)

All costs to sell the property are legitimate deductions, i.e legal fees, realtor commission, costs to get the property ready for sale, e.g. painting, carpet cleaning, etc.


----------



## Eclectic12 (Oct 20, 2010)

elykser said:


> Thank you for your insight!
> 
> These were absolutely new concepts and terms to me before posting my question. If I had known the answer, I wouldn't have posted and thus, wouldn't have surprised you. I admit to learning as I go along.


The trouble with doing so is that you are looking in the rear view mirror. Checking it out in advance might have meant a better situation in what taxes are due to the gov't.

I say this to point out the benefit of being proactive for future situations.


Cheers


----------



## JeanJean (Feb 12, 2016)

*capital gain on jointly owned property*

My ex and I jointly owned a property. after divorce, he sold it and got all the money. actually at the time of sale, he didn't tell me about the sale. there was a bit of gain on the property sale. I assumed that he would have dealt with the capital gain related to the property. 
my Question is: 
if he only claimed 50% of the capital gain, Would Revenu Canada know that I (as the other owner) have not filed for the capital gain of the property sale? 
Anyone knows how Tax dept gets notified about capital gain from property sale? 
The whole thing happened a few years ago. 
any recommendation a good tax consultant? 
i am in toronto now


----------



## AltaRed (Jun 8, 2009)

Your ex would not have been able to sell the property and collect all the proceeds if your name was on title. If title passed to him as part of the divorce settlement, then responsibility for capital gains for your share of the sale would have been specified in that settlement. What were those terms?

IOW, you will have to be more specific before any answers can be provided.


----------



## Just a Guy (Mar 27, 2012)

Nothing could ever have been sold without you signing papers at some point, be it at the divorce or sometime afterwards if you were truly on the title.

You also don't specify if it was a primary residence (tax free) or a secondary one (taxable).


----------



## JeanJean (Feb 12, 2016)

thanks for answer my question. it was an investment property. i've left the country and he got my signed power of attorney. i didn't know about the sale of the property until 2 year later. i asked a real estate agent to check for me on the property and found it was sold. although the total capital gain is about 25k CAD (160k buy price, 185k ish sold price). 
I asked him for transfering the 50% of the gain, but he just disappeared. 
but we don't have any contact and now i am worried if he actually only claimed 50% of the gain. and would that me on CRA list for owing CRA money?


----------



## AltaRed (Jun 8, 2009)

Bizarre arrangement and circumstances. I would suggest any residual tax issues with CRA are the least of your worries, especially you having left the country some years ago. The terms of your POA are the critical matter here and the competence (or incompetence) of your lawyer that advised you on the POA/divorce settlement.


----------



## JeanJean (Feb 12, 2016)

AltaRed said:


> Bizarre arrangement and circumstances. I would suggest any residual tax issues with CRA are the least of your worries, especially you having left the country some years ago. The terms of your POA are the critical matter here and the competence (or incompetence) of your lawyer that advised you on the POA/divorce settlement.


It was too late when i realized it. But I decided to let it go, as far as the money is concerned. 
What I am mostly concerned now is that: If i am to buy a property for investment purpose (i.e. to rent it out), and I'll report income to CRA starting next year (ie. for year 2016) as a non-resident, 
will CRA have me in their list as someone who owed them money in the past? 
anyway to find it out with CRA ? can an accounting firm be able to help on this?
this is to be scary (although maybe i should go to the lawyer's place to find the record about the money received from the sale. at least that'll prove I did not receive any money). 
any thoughts on this? thanks


----------



## Just a Guy (Mar 27, 2012)

I would try and track down what happened to the money, and what was filed with CRA. You'd only be taxed on half the capital gains (12,500, and only half of that is taxable), which a good accountant may have been able lower even further if you did upgrades,or experienced some capital losses over the years. Depending on you income that year, you may not owe anything. 

I'd also question why you'd want to invest in a foreign country, and get involved with cross border taxes when you don't sound like an experienced real estate investor. Why not simplify your life and buy something local? You'd have a better understanding of good prices, be able to manage it, etc.

I've encountered a lot of "investors" who trust their realtors, property manager and others right into bankruptcy...having never even seen their "investments". Real estate investing is a business, you can't just grab anything and make money.

Btw, did you revoke the power of attourney? Or can he clean out your bank accounts, sell your house, get a mortgage/credit cards in your name...you may want to check your credit report.


----------



## AltaRed (Jun 8, 2009)

I would guess the POA would have been specific to the property, but if not, I agree there are bigger risks here.


----------



## JeanJean (Feb 12, 2016)

*POA and property gain tax*



AltaRed said:


> I would guess the POA would have been specific to the property, but if not, I agree there are bigger risks here.


Can you please specify the 'bigger sisks' here? thanks
I've decided to let go the money. and my concern is it may affect me if the CRA somehow (?) thought that I should claim the captital gain (proportionally) and pay the property gain tax. 

on the sale transaction document, it was all signed by my ex (POA). I obtained the transaction title transfer record by paying a fee to a lawyer.


----------



## AltaRed (Jun 8, 2009)

I am saying that if the POA you signed is not limited to just the RE transaction, there is a lot more he could do on your behalf. I assuming though that your lawyer would not have allowed you to sign anything that would have allowed your ex to do anything other than sell the property.


----------

