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Capital Gains Tax On Personal Use Property and Listed Personal Property

A taxpayer has to pay capital gains tax on personal use property (PUP) when disposing of any significant asset that is not income producing (boats, cottage, vacation home), which as basically property used for personal enjoyment.

Capital gains on PUP works much the same as capital gains income producing property but for one major item. Any losses are NOT DEDUCTIBLE! Why, because most personal use property depreciates over time, allowing a deduction on these sort of items would provide deductions for normal wear and tear.

Even if I sell a small item for a gain, do I have to claim a gain?
Likely not. There is a $1,000 floor rule on PUP. What this means in any item disposed of for a sale price of less than $1,000 is deemed to have been disposed of for $1,000. Similarly, any disposed item with an adjusted cost base of less than $1,000 has a deemed adjusted cost base of $1,000.

PUP Examples:

Example # 1:
Mary sells her piano for $900. It cost her $600 (the adjusted cost base) three years ago. What is her PUP capital gain?

Answer. As both the selling price and and the ACB are less than $1,000, both are deemed to be $1,000, and the gain on sale is $0. From a tax perspective Mary bought the piano for $1,000 and sold it for $1,000, no gain or loss.

Example #2
Mary sells her boat for $1,400. She bought it two years ago for $800 (ACB). What is her PUP capital gain?

Answer. As the ACB is less than $1,000, it is deemed to be $1,000. Therefore the gain is $400 ($1,400-$1,000).

Of course, that $400 is multiplied by the inclusion rate of 50%, leaving only $200 as taxable.


 

Listed Personal Property

Listed Personal Property, (LPP) are specific personal use property items, generally specific art and collectible items. They are

  • prints, etchings, drawings, paintings, sculptures, or other similar works of art;
  • jewelery;
  • rare folios, rare manuscripts, or rare books;
  • stamps; and
  • coins

For the most part, LPP and PUP gain calculation work the same, both have the $1,000 floor rule, but there is one major difference. LPP losses can be deducted, but only against other LPP gains. If the taxpayer has not LPP gains, LPP losses can not be deducted. That said, the carry over provision do apply, so losses can be carried back three years, or carried forward indefinitely and applied to future gains.
 
Please click here if you want to leave the Personal Use Property page and return to the Common Tax Deduction and Credits page




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