Savings & Investments

Tax Tip: Defining capital property

Capital property is any property that can create capital gains or losses when you dispose of it. This includes depreciable property used to earn income and the eligible capital property.

According to the Canada Revenue Agency, common examples include land, buildings, shares, bonds, funds, trust units, eligible properties, and personal properties.

Capital property can be tangible items such as cars, boats or buildings, but it can also be intangible property such as tenancy rights, patents, or trademarks which are called eligible capital properties. It can be mobile such as jewellery or immoveable such as warehouses. Additionally, capital property can include fixed assets such as equipment, but it can also include circulating assets such as inventory for your business.

The CRA requires you to report all capital property dispositions, and depending on the type of property, its use and other factors, you may have to report the gain as income or be able to claim the loss.

Non-taxable capital gains

When you sell a personal-use property such as a house or a cottage, you can declare it as a principal residence for the time you occupied the property. In this case, the capital gain earned will be taxed. However, since 2016 CRA put a requirement to file Form T2091, Designation of a property as a principal residence. You also have to report this gain in schedule 3 of your income tax return.

If you owned a house where you lived in it for some years as a principal residence and the other years you have rented it to earn income, you will have to report a capital gain income or loss for the years you used it to earn income.

Non-deductible capital losses

Personal property such as jewellery, stamps, coins, drawings, etc., are called listed personal property (LPP). LLP can generate a capital gain that will be reported as income, otherwise will result in a capital loss. CRA has determined that the capital losses on LLP are considered personal losses and should not be claimed against any income. You have to report the sale on schedule 3 regardless of whether you have a capital gain or a capital loss.

TurboTax software can help you itemize your capital properties and claim the capital gains or losses whether you are reporting them as an investor or a self-employed taxpayer. Consider TurboTax Live Assist & Review if you need further guidance, and get unlimited help and advice as you do your taxes, plus a final review before you file. Or, choose TurboTax Live Full Service* and have one of our tax experts do your return from start to finish.

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