My client has just sold their parking space. What happens about the tax?
If the parking space was acquired initially with the unit, and the unit was always a principal residence, then the unit and the space would continue to be exempt. This would be the case, even if the unit is sold to one Buyer and the space sold to another.
The issue of capital gains arises in the case of investment property where there is an unexpected gain. One half of the gain is taxable.
Should the property be one of a group of properties rented out by the owner, then the owner is in the business, and the sale of the space results in business income which is fully taxable.
The value at the time of initial acquisition is determined simply by allocation and assessment on a best efforts basis. If it’s being sold for $50,000.00 now, what was it reasonably worth when it was initially acquired? Perhaps, $30,000.00? That’s a $20,000.00 gain, if it qualifies for capital gains treatment, one half has to be brought into income in the year of disposition; that would be $10,000.00. The tax payable would be usually half of that at marginal rates or $5,000.00.
Exempt – no tax
Capital gain – $5,000.00
Business income – $10,000.00
Best to investigate this before selling, otherwise the net return might turn out to be a surprise.
Brian Madigan LL.B., Broker