Quote:
Originally Posted by Mathgod
Hmm.. looks like you misunderstood what was being said. Either that or you were so busy trying to push your ideology that you didn't pay attention to what was said.
Let's try again. Jack buys a house that costs $500,000, and the next year sells it for $520,000. The capital gain is $20,000, not $520,000.
Now Jack sells a property he bought 50 years ago, paying $40,000 for it at the time, and sells it today for $500,000. You're not suggesting the capital gain is $500k, are you? It would be $460k would it not?
But adjusted for inflation and converted into today's dollars, the initial buying price is actually something like $240k. So the question was, is the capital gain $460k or $260k? Judging by the answers so far, looks like it's $460k. Just wanted to confirm.
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Ideology? No. Just legalese that you need to understand and learn before you can properly understand the scenario.
I'll put it this way... if you're asking an earnest question, I'll attempt to give you an earnest response (albeit it may be overly simplified). There's a big difference between capital gains and taxable capital gains at times depending on the situation and you have to understand that the people replying you did not create the rules, they are just explaining to you how not to run afoul of them. No need for the ideology accusations.
Although English is used, the Canadian tax act is written in a type of legalese. In such a situation, there are very specific definitions that must be used for the purposes of taxation and not the usage of any definition of a word in English from any dictionary. But your scenario is also missing far too many case facts to conclude appropriately.
For ACB, inflation is not part of the definition/situations where the cost base of the housing property can be adjusted. The purchase price in 1975 would be part of the calculation but should not be the ACB (adjusted cost base) in 2025. If Jack sold the property, the POD you may be using for calculating the taxable capital gain may be incorrect if outlays on the sale are not appropriately included.
Long story short, start understanding the scenario without calculating any numbers.
If this is Jack's sole property and principal residence for the last 50 years, the capital gain doesn't matter. The
taxable capital gain matters. So you need to figure out the tax definitions to figure out how to calculate taxable capital gains properly before you determine if Jack should be upset.
If Jack has held an investment property for 50 years and it is not his principal residence, Jack is likely quite wealthy anyways, so why are you crying tears for him if he is upset he has to pay taxes? Your commentary indicates that you should be happy he's paying his fair share of taxes.
Again, your situation is missing far too much information to conclude and your application/usage of ACB, POD also do not seem appropriately accurate to ensure an accurate conclusion.
Quote:
Originally Posted by mrkajz44
Somewhat related...For very old property, there are basically no capital gains up to 1972. If the property was owned prior to Jan 1, 1972, the ACB when you sell it is the value of the property on Jan 1, 1972. It's known as V-day valuation.
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If an ultra old property disposal, V-Day valuation is just one maybe half a dozen basic items that has to be part of the ACB. An ACB of $40K from 1975 is likely accurate only if that house is completely uninhabitable. $40K is likely to be a horribly inaccurate ACB in 2025 if the house is still habitable 50 years later.