(Ontario)
Question:
My client has just sold their parking space. What happens about the tax?
Answer:
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.
In summary:
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
Comments 4
The condo is the principal residence, I am still living in the condo, but planing to sell one of the parking spots. Is there any tax I need to pay? I may selling the condo later, but later time, if I sell the parking first, will it affect if I sell the condo later?
Author
If you sell the two together then they should qualify as one principal residence and be exempt from any capital gains tax.
However, if you bought the parking space separately and it was held under a separate conveyance and you rented it out to others in the building, then it may not fall under the Exemption for principal residences.
Also, if you sell it independently, CRA may view it as being subject to capital gains tax.
Best to consult your tax advisor (either lawyer or accountant) before tiy take steps to sell.
here’s one for you.
same building, 2 condos, 2 parking spots. sold one condo without the parking. Now left with one condo 2 spots. next, sell one parking spot independantly for a profit. does that trigger capital gain ?
Author
It could be structured either way.