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Capital gains and allowable Capital Losses are taxed or allowed at 50% of the actual gain or loss incurred (ITA s. 38).

Gains arising on the sale of an asset held for the purposes of generating investment or business income are considered to be capital gains. Capital property is defined as (ITA s. 54, s. 248) :

1. Ìý

   •ÌýÌýÌýÌý any depreciable property of the taxpayer, and

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   •ÌýÌýÌýÌý any property (other than depreciable property), any gain or loss from the disposition of which would, if the property were disposed of, be a capital gain or a capital loss (immobilisations)

A capital gain is the amount by which the proceeds of disposition of a property exceeds the total of the adjusted cost base plus the cost of the disposition itself. From this, the taxpayer may deduct a loss from the disposition of property where the adjusted cost base plus cost of sale exceeds the proceeds of sale.

Canada does allow for certain exemptions, including but not limited to:

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   •ÌýÌýÌýÌý gains realised from the sale of a principal residence