A client sells a rental property for $600,000. They purchased it for $400,000 and incurred selling costs of $25,000. What is the taxable capital gain for federal tax purposes?

Question: A client sells a rental property for $600,000. They purchased it for $400,000 and incurred selling costs of $25,000. What is the taxable capital gain for federal tax purposes?

Answer options: ✅ $87,500

• $175,000
• $100,000
• $200,000

Correct answer: $87,500

Explanation: The capital gain is calculated as proceeds of disposition ($600,000) minus adjusted cost base ($400,000) minus selling costs ($25,000), which equals $175,000. The taxable capital gain is 50% of the capital gain, so 0.50 x $175,000 = $87,500.