# How to calculate capital gains (real estate)



## ECMoney

Hello,
My first post to the forum and glad I found the forum, looks like my new favourite home 
I sold my investment condo last January and now doing my 2011 taxes and figuring out how this capital gains works, first time I have sold an investment property.

From reading on my tax program the formula is pretty simple.

Proceeds of Disposition – Adjusted Cost Base – Outlays and Expenses = Gain x 50% = Taxable Capital Gain 

Now that part is easy, defining each component is a bit tricker.

Proceeds of Disposition is straight forward. What I sold my condo for.

Adjusted Cost Base is also pretty straight forward. So basically my original purchase price plus any expenses incurred to acquire the property.

Tricky part is the Outlays and Expenses. This is the amount that I incurred to sell the property. From what I have read it seems that these types of expenses include fixing-up expenses, finders' fees, commissions, brokers' fees, surveyors' fees, legal fees, transfer taxes, and advertising costs. With that being said, if I owned the condo for 10 years and spent for example $1000 a year in upkeep, would this be valid to include or does this only include any "fixing-up expenses" that I had to pay now to sell the property?

Thanks in advance!


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## stardancer

ECMoney said:


> ...
> Tricky part is the Outlays and Expenses. This is the amount that I incurred to sell the property. From what I have read it seems that these types of expenses include fixing-up expenses, finders' fees, commissions, brokers' fees, surveyors' fees, legal fees, transfer taxes, and advertising costs. With that being said, if I owned the condo for 10 years and spent for example $1000 a year in upkeep, would this be valid to include or does this only include any "fixing-up expenses" that I had to pay now to sell the property?
> 
> Thanks in advance!


If you have done improvements in the past that would count as capital expenditures, those expenses should have been added to the cost base and increase your adjusted cost base.

Upkeep expenses such as utilities, cleaning, property taxes, insurance and the like should have been used as expenses against rental income. If you didn't have rental income, you lose them.

Fixing-up expenses to get the place ready to sell are added to the outlays and expenses total.


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## ECMoney

stardancer said:


> Fixing-up expenses to get the place ready to sell are added to the outlays and expenses total.


Thanks for the help! Much appreciated.


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## tonygow

*Followup question on capital gains*

I have been including cost of acquisition, leasehold improvements and expenses in my yearly taxes. I have accumulated a BNIL of 25K over the last 4 years. Would this be included as part of the ACB or do I need to show cost of acquisition and cost of disposal as separate items.


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## Cal

And to further clarify the above formula.

If the sale price we 250K, and the original purchase price were 100K, and not including expenses for the sake of simplicity.

Then the gain would be 150K x 50%, which would equal 75K. And that 75K would be taxable at the individuals personal tax rate. Is that correct?


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## kcowan

Yes!


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## Cal

Would legal fees and RE agent fees count as the above mentioned 'outlays and expenses'?


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