Question

Ms. Jennie Smith owns a house in Ottawa. She purchased the house in 2004 for $129000. In June 2019, she sold the house for $220000 and designated the house as a principal residence for 7 years. Determine the minimum taxable capital gain that she must report on the 2019 sale of the house, after considering the principal residence exemption. CANADA TAX ANSWER = 22750 HOW

Answer 1

Ms. Jennie Smith must report a minimum taxable capital gain of $22,750 on the 2019 sale of her house after considering the principal residence exemption.

Step-by-step explanation:

The minimum taxable capital gain that Ms. Jennie Smith must report on the 2019 sale of her house after considering the principal residence exemption is $22,750.

The formula to calculate the taxable capital gain is: Taxable Capital Gain = Selling Price - (Purchase Price + Costs + Capital Improvements) - Principal Residence Exemption.

In this case, Ms. Jennie Smith's selling price is $220,000, her purchase price is $129,000, and she designated the house as her principal residence for 7 years, which means her principal residence exemption is 7/15 of the gain. The calculation is: $220,000 - ($129,000 + Costs + Capital Improvements) - ($220,000 - $129,000) x (7/15) = $22,750.