Question

On April 1, 2005, Catherine purchased a condominium in Horseshoe Valley, Ontario, for $30,000. She lived in the condominium until she married in August 2009. At that time, she moved into a rented apartment in north Toronto, Ontario, with her new husband. She commenced to rent her condominium in late 2009, at which time it was valued at $45,000. In December 2018 she sold the condominium for $80,000 to generate some cash to pay for a new house. Assuming that Catherine elected under subsection 45(2) in respect of the condominium in 2009, what is the approximate minimum taxable capital gain that she will realize in 2018 on the sale?

	$11,905
	$7,143
	$9,524
	$50,000

Answer 1

Section 45(2) was inserted in the Act w. e. f. 01.04.1985. However, the Act did not contain any provision for taxability in the event of conversion of Stock-in-trade into or its treatment as Capital Asset.

After more than 3 decades of this amendment, the Memorandum explaining the provisions seek to suggest that there was an asymmetrical treatment and that there was deferment of tax payment by converting of Inventory into Capital Asset. Both these observations seem to be delayed and a fractured response to the need for this amendment.

As the asset is purchased 14 years before taxable capital gains will be fair value less the purchase value of asset.

80000-30000 = 50000 taxable capital gains