To calculate any capital gain or loss, you need to know the following three amounts:
- the proceeds of disposition
- the adjusted cost base (ACB)
- the outlays and expenses incurred to sell your property
To calculate your capital gain or loss, subtract the total of your property's ACB, and any outlays and expenses incurred to sell your property, from the proceeds of disposition.
You have a capital gain when you sell, or are considered to have sold, a capital property for more than the total of its ACB and the outlays and expenses incurred to sell the property.
When you sell, or are considered to have sold, a capital property for less than its ACB plus the outlays and expenses incurred to sell the property, you have a capital loss. You can apply 1/2 of your capital losses against any taxable capital gains in the year. For more information on capital losses, see Capital losses and deductions.
You may be entitled to an inclusion rate of zero on any capital gain resulting from the donation of any of the following properties to a qualified donee:
- a share of the capital stock of a mutual fund corporation
- a unit of a mutual fund trust
- an interest in a related segregated fund trust
- a prescribed debt obligation that is not a linked note
- ecologically sensitive land including a covenant, an easem*nt, or in the case of land in Quebec, a personal servitude (when certain conditions are met), or a real servitude donated to certain qualified donees other than a private foundation
- a share, debt obligation, or right listed on a designated stock exchange
For donations of publicly traded securities, the inclusion rate of zero also applies to any capital gain realized on the exchange of shares of the capital stock of a corporation for those publicly listed securities donated. This treatment is subject to certain conditions. In cases where the exchanged securities are partnership interests, a special calculation is required to determine the capital gain to be reported. For more information on exchangeable securities, see Guide P113, Gifts and Income Tax.
Generally, if you donate property to a qualified donee that is, at the time of the donation, included in a flow-through share class of property, in addition to any capital gain that would otherwise be subject to the zero inclusion rate, you may be deemed to have a capital gain from the disposition of another capital property. For more information including the calculation of the capital gain, see Guide P113, Gifts and Income Tax.
If you donated any of these properties, use Form T1170, Capital Gains on Gifts of Certain Capital Property, to calculate the capital gain to report on Schedule 3.
Even though, in most cases, the inclusion rate of 1/2 is reduced to zero for gifts of these properties, Form T1170 should still be completed to report these gifts.
However, in all cases, if you received an advantage in respect of the gift, part of the capital gain on the gifted property will be subject to the 1/2 inclusion rate. In addition, the inclusion rate of zero does not apply to capital losses you may have from such donations.For more information, see Capital Gains realized on gifts of certain capital property.
Completing your tax return
Use Schedule 3, Capital Gains (or Losses), to calculate and report all your capital gains and losses. Do not include any capital gains or losses in your business or property income, even if you used the property for your business. For more information, see Completing Schedule 3.
If you donated certain properties to a qualified donee, you will also have to complete Form T1170, Capital Gains on Gifts of Certain Capital Property.
Forms and publications
As a financial expert with a deep understanding of capital gains and taxation, I can shed light on the concepts mentioned in the provided article. My expertise in this field allows me to break down the complex elements involved in calculating capital gains and losses.
Firstly, to calculate any capital gain or loss, three crucial amounts are required:
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Proceeds of Disposition: This refers to the amount you receive when you sell or dispose of a capital property.
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Adjusted Cost Base (ACB): The ACB is the original cost of the property, adjusted for various factors such as improvements or depreciation.
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Outlays and Expenses: These are the costs incurred in selling the property, including legal fees or commissions.
The formula to calculate your capital gain or loss is straightforward: deduct the total ACB and outlays/expenses from the proceeds of disposition. If the result is positive, you have a capital gain; if negative, it's a capital loss.
Furthermore, the article touches upon the application of 1/2 of capital losses against taxable capital gains in the year. This implies that only half of your capital losses can be used to offset taxable gains.
The inclusion rate of zero is discussed in the context of donating specific properties to qualified donees. This rate may apply to various properties, such as shares, mutual funds, or ecologically sensitive land, under certain conditions. The article emphasizes the need to use Form T1170 for calculating capital gains on gifts of certain capital property, even when the inclusion rate is reduced to zero.
Additionally, it mentions the importance of Schedule 3 for reporting all capital gains and losses. Notably, capital gains from gifts of certain properties may still be subject to a 1/2 inclusion rate if an advantage was received in respect of the gift.
For a comprehensive understanding, the article refers to several guides and forms, including Guide T4037 (Capital Gains), Guide P113 (Gifts and Income Tax), Form T1170, and others. These resources provide detailed information on capital gains deductions, donations, and gifts.
In conclusion, navigating the realm of capital gains involves a nuanced understanding of proceeds, ACB, expenses, and specific rules regarding the inclusion rate for donated properties. Utilizing the mentioned forms and guides can ensure accurate reporting and compliance with tax regulations.
