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NotesCh7 (2).pdf

Administrative Studies
Course Code
ADMS 3520
Thaddeus Hwong

of 9
Capital Gains
- defined as gains on disposal of capital property
- capital assets are assets which are capable of earning
income in the form of business profits, interest,
dividends, rents or royalties
Special Rules
- Assets purchased before 1972
- Assets purchases after 1971
- Principal Residence
- Personal Use Property
- Listed Personal Property
- Capital Gain Reserves
Taxable Capital Gains
- calculated as:
Proceeds of Sale
- Cost of asset sold
= Capital Gain
Taxable Capital Gain = 50% of Capital Gain
Allowable Capital Losses = 50% of Capital Loss
- these can be applied against taxable capital gains
Asset purchased before 1972
- there was no capital gains tax before 1972
- all assets owned at December 31, 1971 are valued at
that date. This is called their V-day value.
- for the sale of assets owned at December 31, 1971,
there are two methods to calculate the capital gain.
These are the median rule and the V-day valuation
Median Rule
- ACB of the asset sold is the middle value between
cost, V-day value and proceeds.
V-day Valuation Method
- ACB of asset sold is the V-day value of the asset.