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Capital Gains and Losses
10-04-2016
Usually, you have a capital gain or loss when you sell or are considered to have sold capital property. The following are examples of cases where you are considered to have sold capital property:
• You exchange one property for another.
• You give property (other than cash) as a gift.
• Shares or other securities in your name are converted.
• You settle or cancel a debt owed to you.
• You transfer certain property to a trust.
• Your property is expropriated.
• Your property is stolen.
• Your property is destroyed.
• An option that you hold to buy or sell property expires.
• A corporation redeems or cancels shares or other securities that you hold (you will usually be considered to have received a dividend, the amount of which will be shown on a T5 slip).
• You change all or part of the property's use.
• You leave Canada [see Leaving Canada (emigrants)].
• The owner dies (see What to do when someone has died).
Also, depending on your own situation, you may or may not have a capital gain (or loss) when you dispose of personal-use property or Canadian securities.
Change in Use
You can be considered to have sold all or part of your property even though you did not actually sell it. The following are some sample situations:
• You change all or part of your principal residence to a rental or business operation.
• You change your rental or business operation to a principal residence.
Every time you change the use of a property, you are considered to have sold the property at its fair market value and to have immediately reacquired the property for the same amount. You have to report the resulting capital gain or loss (in certain situations) in the year the change of use occurs.
If the property was your principal residence for any year you owned it before you changed its use, you do not have to pay tax on any gain that relates to those years. You only have to report the gain that relates to the years your home was not your principal residence.
If you were using the property to earn or produce income before you changed its use, see Real estate, depreciable property, and other properties for information on how to report any capital gain or loss.
Footnotes: Footnotes: This column is presented as a general source of information only and is not intended as a solicitation for business. Mohammed Yasin, CPA,CGA, is the principal of M. Yasin & Co. Inc., Certified General Accountants and has offices in Vancouver & Surrey,B.C.
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