# Capital Gain tax on second house



## annmississauga (Mar 20, 2012)

Hi,

We bought a second house 2 yrs ago. We bought it for the purpose of selling it later and hopefully can earn a profit after 2 yrs. We didnt rent it out.

When I bought this house I am not aware that I have to pay a capital gain tax when you sell it. I thought capital gain tax is only for a house that is more than 500K (mine is a small one and less than 300K)

Could someone pls let me know if I really need to pay capital gain tax and if yes, how much is it?

Thanks in advance for your reply.


----------



## Spudd (Oct 11, 2011)

Yes, you have to pay tax if you sell a house that is not your primary residence. The capital gain will be equal to the amount you sell it for, minus the amount you paid for it, minus expenses (realtor fees, etc). You will then end up paying income tax on half of the capital gains.


----------



## kcowan (Jul 1, 2010)

You should put together a story that you intended to move into it but later changed your mind. Otherwise, it is a speculative investment and the proceeds for such speculations can be taxed at 100% if they amount to a significant amount when compared to your normal income. The risk is low on a one-off but it is there.

Also, the fact that you never rented it out supports the PR approach. You might get away with claiming it as a PR but that gets tricky.


----------



## Potato (Apr 3, 2009)

kcowan said:


> Otherwise, it is a speculative investment and the proceeds for such speculations can be taxed at 100%


Citation needed.


----------



## Cal (Jun 17, 2009)

There is another thread that has some more info on the calculations of capital gains in this circumstance. (Just use the search feature)

And you may want to consult with an accountant in this regard as well.


----------



## kcowan (Jul 1, 2010)

Potato said:


> Citation needed.


Old CRA interpretation
Lots of examples here, e.g. Problem 8-2From Part VIII:


> Capital gains and losses occur when property that was acquired for the purpose of
> providing the owner with a long-term or enduring benefit is disposed of. It is the
> intended purpose of acquisition that establishes its capital nature, not the nature of
> the asset itself.


This is a complex subject and best left to the experts. But even experts make mistakes and you end up paying for them. CRA has determined that capital gain is treated as income when the amount is a major portion of total receipts in the year. That is why the intention is also key.


----------



## Homerhomer (Oct 18, 2010)

kcowan said:


> Old CRA interpretation
> Lots of examples here, e.g. Problem 8-2From Part VIII:
> This is a complex subject and best left to the experts. But even experts make mistakes and you end up paying for them. CRA has determined that capital gain is treated as income when the amount is a major portion of total receipts in the year. That is why the intention is also key.


From the practical point of view CRA will treat it as income based on volume of transactions, if this is one of, and the owner sat on it for two years, I don't see CRA disputing capital gains, however if one is to do it more often then they are in the business of buying and selling properties, and it will became an income.

Sort of like equity investor and day trader.


----------



## OhGreatGuru (May 24, 2009)

To OP: Download and read CRA T4037 - Capital Gains and IT120 - Principal Residence.


----------

