Ostroff, Fair and Company
*Ostroff, Fair and Company>>>Canada Taxes

Is this considered business income or a capital gain?


I have 160 acres of land that I am selling to a developer as 10 separate lots. For tax reporting in Canada is this considered business income or can I call the profit on sale a capital gain and therefore be eligible for the 50 % capital gains deduction?

only business income if you are in the business of selling land or real estate
i imagine it depends on whether or not it is part of your personal investment or part of an investment purchased by your corporation etc. Better talk to a Tax consultant.
hire an accountant or financial adviser (whose fees you can also claim as a business expense)
If you are not in the business of buying and selling land for profit, then you will be required to report any gains you make on the sale. You will be able to deduct your ACB (adjusted cost base) from the sale proceeds.
Your ACB could have been increased in 1994 if you filed a capital gains election for that year. Otherwise your ACB will be the price that you paid for the land PLUS anything you were forced to pay over the years for improvements to the land (sewers, easements etc) -- this would obviously lessen your gain.
Then you will subtract from the gain any costs or outlays you have in selling the land, such as legal bills, real estate fees, etc.

Then you will only report half of your gains as taxable. Hope you made a bundle on the deal.
it will probably end up capital gains
Buisness taxes in Canada are tricky. When you bought the land, it would have been a capital gain, and you could have deducted the 50% that you paid for it, When you sell it, it's considered business income, if it's sold in the name of the business. That's what a capital gain is.. it's something that you BUY that can be resold at a later date.. any money that comes from you selling the Capital Gain, is now income.
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