Question

peter sold a capital property on december 31, 2022 for $300,000. $280,000 is payable on december 31, 2024, and the balance was paid immediately in cash. the adjusted cost base of the property was $170,000 and the selling costs totalled $10, one of the following amounts represents the minimum taxable capital gain in 2022?

Answer 1

The minimum taxable capital gain for Peter in 2022 is $0, as the immediate cash payment he received upon the sale of the property was less than the adjusted cost base and selling costs.

Step-by-step explanation:

If Peter sold a capital property on December 31, 2022, for $300,000 with $280,000 payable on December 31, 2024, and the immediate payment of the balance, we must calculate the minimum taxable capital gain for 2022. The adjusted cost base of the property was $170,000 and the selling costs totaled $10. To find the minimum taxable capital gain in 2022, we would subtract the adjusted cost base and selling costs from the amount received in 2022 and multiply the result by 50% since only 50% of a capital gain is taxable in Canada.

The balance paid immediately in cash would be the difference between the selling price and the deferred amount, which is $300,000 - $280,000 = $20,000. To calculate the taxable capital gain:

1. Subtract the adjusted cost base ($170,000) and the selling costs ($10) from the cash received in 2022 ($20,000): $20,000 - $170,000 - $10 = -$150,010.
2. Since the amount is negative, there would be no capital gain realized in 2022; thus, the minimum taxable capital gain for 2022 would be $0.

Note that the remaining capital gain attributable to the deferred payment would be dealt with in the year the payment is received, subject to any tax provisions such as capital gains reserve that may apply.