Humber/Ontario Real Estate Course 1 Exam Practice

Which scenario would most likely be considered a capital gain by the Canada Revenue Agency?

1. Frequent property sales resulting in profits

2. Reselling property as a primary business activity

3. Occasional sale of a personal vacation home

4. Purchasing property specifically to resell

5. Profits from subdividing and selling land

6. Utilizing real estate sales for primary income

The correct answer is: Occasional sale of a personal vacation home

The scenario that would most likely be considered a capital gain by the Canada Revenue Agency involves the occasional sale of a personal vacation home. This is because capital gains are typically realized when an individual sells a property that has appreciated in value and is not classified as a primary business activity. In this case, a personal vacation home is deemed a personal asset rather than a property held for business purposes. When sold, the profit from this sale is treated as a capital gain, assuming the property doesn't fall under adverse conditions like being an investment or business property, which might lead to different tax implications. Capital gains arise from the disposition of properties that are not part of a frequent trading activity, like businesses that actively buy and sell properties. Hence, the occasional sale of a vacation home aligns with the principles defining personal capital gains.