Definitions

"Listed Personal Property"

  • "Listed personal property" (LPP) is a subset of "personal‐use property" (PUP)
  • LPP of a taxpayer is the taxpayer's PUP that is all or any portion of, or any interest in or right to any
  • Print, etching, drawing, painting, sculpture, or other similar work of art
  • Jewellery
  • Rare folio, rare manuscript, or rare book
  • Stamp
  • Coin

"Personal‐Use Property"

  • PUP of a taxpayer is broadly defined to include property owned by the taxpayer and used primarily for the personal use and enjoyment of one or more of:
    • the taxpayer
    • a person related to the taxpayer
    • where the taxpayer is a trust, a beneficiary under the trust or any person related to the beneficiary
  • Also includes debts receivable from the sale of PUP and options to acquire property that would be PUP

Taxation of Personal‐Use Property

Capital Gains and Losses

  • Capital gains arising from dispositions of PUP are generally taxable in accordance with normal rules
  • Capital losses from dispositions of PUP (other than LPP) are deemed nil
  • Policy is that capital losses on PUP represent "depreciation" from personal use
  • On the other hand, a capital gain from PUP is a true increase in wealth that should be taxed

$1,000 Rule

  • Special rule designed to exempt small transactions in PUP from taxation
  • Where PUP disposed of, ACB and POD are each deemed to be the greater of:
    • $1,000; and
    • Actual amounts
  • Effect is to exempt transactions under $1,000 from tax
  • Also creates "tax‐free zone" of $1,000

$1,000 Rule – Example 1

  • Mr. A owns PUP with ACB = $500
  • Mr. A sells PUP for POD = $700
  • Capital gain in accordance with normal rules = $200 ($700 ‐ $500)
  • But under $1,000 Rule, ACB and POD are deemed to be greater of $1,000 and actual amounts, so Mr. A's capital gain is nil ($1,000 ‐ $1,000 = $Nil)

$1,000 Rule – Example 2

  • Ms. B owns PUP with ACB = $400
  • Ms. B sells PUP for POD = $1,400
  • Capital gain in accordance with normal rules = $1,000 ($1,400 ‐ $400)
  • But under $1,000 Rule, ACB and POD are deemed to be greater of $1,000 and actual amounts, so Ms. B's capital gain is $400 ($1,400 ‐ $1,000)

Listed Personal Property Losses

  • Exception to the rule prohibiting capital losses on PUP
  • Capital losses on LPP are not deemed nil
  • Can only be utilized against capital gains on LPP
  • Policy is that LPP is more like an investment than other PUP, so it is appropriate to allow some recognition of losses
  • In computing income, include taxpayer's taxable net gain from dispositions of LPP
  • Taxable net gain from LPP = gains for the year from LPP less losses for the year from LPP
  • LPP losses can also be carried back 3 years and forward 7 years, but only against LPP gains
  • Note: $1,000 rule applies to LPP and can reduce or eliminate a loss from LPP before it can be applied against LPP gains for the year

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.