Income Tax Act s. 40(2)(g)(iii), s. 46, s. 54
Personal-use property includes
(a) property that is used primarily for the personal use or enjoyment of
(i) the taxpayer,
(ii) a person related to the taxpayer, or
(iii) where the taxpayer is a trust, a beneficiary under the trust or any person related to the beneficiary
(b) any debt owing to the taxpayer that is an option to acquire personal use property
(c) any property that is an option to acquire personal use property.
Personal-use property includes cars, boats, furniture and other property used for personal use. It also includes Listed Personal Property (LPP), which is treated slightly differently from other personal property for tax purposes.
If you have personal-use property which you purchased for more than $1,000, and you sell the property for more than you paid, you will have a capital gain to report on your tax return. The deemed cost of personal-use property purchased for less than $1,000 is $1,000. The deemed proceeds from sales of personal use property sold for less than $1,000 are deemed to be $1,000. If you have personal-use property which you purchased for $800, and you sell the property for $1,300, your capital gain will be $300 ($1,300 less the deemed cost of $1,000). If you sell the property at a loss, generally the loss cannot be claimed, unless it is listed personal property.
If you have capital improvement costs related to your personal use property, these costs would increase the adjusted cost base of the property.
If you have acquired the property for donation to a qualified donee, see the Canada Revenue Agency article below on personal-use property.
Capital gains from personal-use property are reported on Schedule 3 of the personal income tax return, and Schedule 6 of the corporate income tax return.
Note that capital gains from cottages can be eligible for the principal residence exemption, even if located in another country. See the article on the Principal Residence Exemption (link below).
If personal use property has been purchased with the intent of reselling at a profit, or improved and sold as a business endeavour, then the gain on sale would be considered a business transaction, with the entire profit on the sale is taxable, instead of being taxed as a capital gain, with only 50% of the profit being taxed.
Canada Revenue Agency (CRA) Resources
T2 Corporation Income Tax Guide (T4012) - the T4012 includes corporate tax treatment of personal use property
Revised: October 01, 2022
Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved. See Reproduction of information from TaxTips.ca