Capital gains on land sales

Ask MoneySense: Capital gains

Land sold to a builder is is subject to capital gains.


Q: We divided our property and gave half the land to a builder in exchange for building us a new house. Now we want to sell the house. Will we have to pay capital gains tax?


A: You won’t have to pay capital gains tax on the sale of your home, but you likely will have to pay tax on the subdivided portion of the land. According to Brian Quinlan, a chartered accountant with Campbell Lawless Professional Corporation, the land sold to the builder would be viewed as “deemed proceeds of disposition.” Your capital gain would be determined by the selling price of the land (which in your case is equal to the total cost incurred by the builder in replacing your original home) less a reasonable portion of the adjusted cost base of the land.

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