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Capital Gains and Form T4037

About Sam Faris, Licensed Public Accountant

Canada taxes both income and capital gains, but the two are taxed differently. Capital gains and capital losses result from the disposition of capital property. The difference between capital property, inventory, and personal property is not covered in this article. As a general guide, property that is held as an investment to produce income, such as stocks, rental property, or bonds. Interestingly, a disposition includes a sale, but also includes other events such as a deemed sale, a gift, theft of property, or expropriation by government.

As already mentioned, capital property is taxed differently than income. For a number of policy reasons, taxable capital gains are half of the actual capital gain. This means that only half of the gain is taxed and the other half is received tax free. This is a large tax advantage. If, for example, you bought stock for $1,000 and the sold it for $10,000, the gain on the sale is $9,0000. Of the $9,000 gain, only half or $4,500 is taxable and the other $4,500 is received tax free. So, how does a taxpayer report their capital gains or losses to the Canada Revenue Agency (“CRA”)? The CRA has Form T4037 “Capital Gains” that is a partial guide for the most common issues and questions that a taxpayer may have when faced with reporting capital gains. This guide is lengthy despite it not being comprehensive.

For most people, cra capital gains and losses will be on information slips you are provided yearly, information slips you are provided yearly, including T3, 4PS, T5 and T5013. In other cases, your investment account history will provide you with the purchase and sale of securities that, if capital property, must be reported. For 2016, a few things have changed. The change that will affect almost every Canadian at some point is the reporting requirements for sales of principal residences. Before 2016, you didn’t have to report gains on sales of principal residences where you applied the principal residence exemption. After 2016, the gains on the sale of a principal residence are still tax free, but you have to report the gain to the CRA. You report your gains or losses from dispositions of capital property in the year you have disposed of the property. The reporting is one in your tax return and is due on the date your tax return is due. Schedule 3 of your T1 is where you show how you calculate your capital gains or capital losses for the year.

In order to report a capital gain or a loss, you have to know how to calculate it. There are two general components to the calculation. The first component refers to when you bought the property and is called the Adjusted Cost Base or ACB. This is the amount you paid to get the property. To this, you also add any cost or expenses that relate to your purchase of the property. Cost can include lawyer fees, commissions paid to brokers, and other costs related to you getting this property in your name.

The second is called the “proceeds of disposition” and refers to the amount you received when you sold the property. As with the ACB, you get to deduct any costs or expenses that relate to your disposition of the property. One note of caution. The proceeds of disposition is not always the amount you received on the disposition. If you have made a gift or property or sold property at a value other than fair market value to someone who is not at arm’s length (for example a relative) to you, then what you receive is not what you have to report. For example, where you have given property to a child, then even though you haven’t received any money from your child, the proceeds of disposition will be the fair market value of the property (unless an exception is available).

To get the capital gain or loss, you take the “proceeds of disposition” and deduct from this the ACB of the property. Where the number is positive, you have a capital gain. Where the number is negative, you have a capital loss. The taxable portion of the capital gain is 50% of the capital gain, and the allowable portion of the capital loss is 50% of the capital loss. You can carry back capital losses for three years and you can carry capital losses forward indefinitely.

There are a few exclusion where otherwise you would have to report and pay tax on gains. The most well known exception is the life-time capital gains exclusion for the sale of certain private company shares or for sale of farm or fishing properties. However, where you make a donation of certain properties to a charity (a qualified donee), you don’t have to include any amount at all. The donation of mutual fund stock, mutual fund trust units, interest in a segregated fund, ecologically sensitive land, and publicly traded shares or debt are the kinds of property where a donation won’t result in you having to pay tax on the gain.

This article is meant to introduce you to the reporting of capital gains and losses and provide some general information about capital gain. However, the devil is always in the details. The taxation of capital gains or losses, and the question of whether property is even capital property, can be very complex. Unless your case is one of the few that clearly falls into the capital gain bucket, it is best to contact a tax professional and make sure you are filing your taxes and reporting your gains correctly. This way you avoid penalties and taxes. If you have reported or think you have reported gains wrong in past years, you may be eligible to avoid penalties and interest by using the CRA’s Voluntary Disclosure Program. To see if you are eligible, contact Faris CPA.

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pro-tip

Pro Tip

ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

Fadwa Layous
Fadwa Layous
1745074093
I found Sam online and I decided to have a consultation with him to discuss my CRA audit. I got a very good feeling about him, his integrity and his tax knowledge and skills and I had no doubts that he would be the best fit to provide audit help and support. I decided to hire him to handle my case. His approach to my case was consistent to the advice that he gave me at the conclusion. Sam was able to prepare working papers and supporting documents to show the auditor why his numbers are overstated. Sam had to involve the team leader and insisted to meet with him as the auditor refused to adjust his numbers. Sam confidently presented his work to the team leader and the team leader accepted his numbers without any adjustments. Sam deserves 10 stars for all what he has done in my CRA audit case and all his support and help.
Louis Makhoul
Louis Makhoul
1745070683
Thank you Sam for your guidance and walking me through the implication of being taxed in Canada as a US resident. You help is very helpful and informative.
Filippo Alviani
Filippo Alviani
1745016692
It was a pleasure working with Mr. Faris. He is highly respectful, meets his promises and has a very high business standards. We approached Mr. Faris as we needed help in a tax audit. We have hired a tax lawyer to help us before but he did not deliver. We were referred to Mr. Faris by one of his clients who highly recommended him to us. Mr. Faris met our expectations and was able to deliver a package to the CRA to resolve the situation to our satisfaction. We are glad that we met him and used his services.
I am very grateful to Mr. Faris and his team. I appreciate their expertise, support and professionalism in my most difficult time in life fighting the CRA. They were always made me feel that I am in a good hands and the results that they got very impressive. If you have any problem with the CRA, hire Faris CPA as they are top notch tax firm.
I recently had a consultation with Mr. Faris regarding a CRA audit. He was very knowledgeable. He helped me to get a fair understanding of my situation and reduced my stress level by suggesting a very good approach to address the audit and how to eliminate unfavorable audit results.
Husna A
Husna A
1744125375
I had the pleasure of working with Sam during a CRA audit, and I can confidently say he is an expert in his field. His deep understanding of tax laws and CRA procedures was immediately clear. Sam is incredibly thorough—he reviewed all my documents with precision, identified areas that needed attention, and ensured everything was in perfect order before submission.

What really stood out was his strategic thinking. Sam didn’t just react to CRA inquiries—he anticipated them, prepared strong responses, and communicated with the CRA on my behalf in a professional and effective manner. His ability to break down complex tax language into something I could actually understand was a huge relief.

Beyond his technical skills, Sam is patient, calm under pressure, and genuinely dedicated to helping his clients. I never felt rushed or overwhelmed—he made a stressful experience feel completely manageable. If you need help with a CRA audit or any tax-related issue, Sam is the person you want in your corner. Highly recommended!
A McLean
A McLean
1743781009
I was referred to Sam Faris by a family member as I needed tax help from a professional and tax expert. I met in person with Sam and explained the tax audit that I am having. Sam reviewed all the documents that I have and reviewed my tax history and figured what triggered the red flag by the CRA. It was the wrong filling by my previous accountant. Based on Sam’s experience with similar cases, he determined the best approach to fight the CRA audit. I trusted his advice and I decided to hire his services. As expected, Sam kept his promises and worked aggressively on my file based on the approach that he determined when I first met him. Long story short, the results that he achieved for me were very sufficient. I had to pay a very minimal tax bill compared to what the CRA proposed at the beginning. My life is back to normal now and CRA is not part of it anymore. I can’t thank Sam enough for the great work that he has done for me.
Petros Neguse
Petros Neguse
1743720410
Sam Faris was very helpful in providing the approach for my corporate audit with the CRA. His approach saved me time, money and of course emotion in dealing with the CRA. The work was performed on timely basis and with the budget so there were no surprises.
Working with CPA Faris and the team on an issue I had with CRA was stress free and such a breeze they are attentive to customers needs and the seamless service is second to none they resolved my issue swiftly and I’ll definitely be recommending there services
Deniese Scott
Deniese Scott
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I had an excellent experience working with Sam Faris. Their team is knowledgeable, professional, and incredibly efficient. They took the time to understand my situation, provided clear explanations, and ensured I received the best possible outcome. The process was smooth, and they handled everything with great attention to detail.
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Aymann El-Hakim
Aymann El-Hakim
1743623387
Sam and his team are amazing. They know how the CRA operates and are able to get results based on your actual numbers - not the inflated CRA ones. Faris CPA really are life-savers!
I had the pleasure of working with Sam Faris to deal with a complex matter with the CRA, and I am very satisfied with his services. He provided exceptional support and guidance. He demonstrated commitment to my case and was on top of every task I hired him for. I felt I am in a very good hands and was confident with his capabilities.
Sam is a professional who cares about his clients and provides a high level of service. His professionalism and work ethic makes him a respected CPA and his high level of customer service makes him a good businessman. It is a true pleasure to work with him and I highly recommend him as a CPA.
Sam and his team were both wonderful to deal with. They are professional, knowledgeable, and always quick to respond to any questions. They helped me through a difficult time with the CRA audit. Their attention to details and dedication very much appreciated.
Amanda Leigh
Amanda Leigh
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I had an excellent experience with Sam and his team. They were professional, responsive, and took the time to understand my needs. Their expertise in accounting and tax laws helped me navigate my finances with ease. I highly recommend FARIS CPA for anyone seeking reliable and personalized accounting services
Tara B.
Tara B.
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I found Sam Faris to be very professional and helpful. He took the time to answer my questions and concerns. I’d made a mistake reporting income from the United States, so I had to file amendments for several years of taxes, submit an application to the VDP, and file a few years that I was behind on. After I struggled for months just trying to figure out where to start, Sam got it all done in just three days. I appreciated his step-by-step method of collecting information that was never too overwhelming.
Alla G
Alla G
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Very Pleasant to deal with and extremely knowledgeable with tax issues
Thank you Sam with all your help and support.
zeina moalem
zeina moalem
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i scheduled a consultation with Sam regarding some tax questions. Sam has answered all my questions to my satisfaction. he was friendly, patient and very polite. he also waived the charge for me. many thanks to Sam.
Delina Tekle
Delina Tekle
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IKRAM HUSSAIN
IKRAM HUSSAIN
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Supper knowledgeable with tax matters with the cra.
I was referred to Sam by a family friend who has dealt with him during a tax audit. Sam help me out to resolve my audit with the CRA. He was prompt in replying and have high business standards. Sam responded to the unfair proposal letter by the CRA and was able to convince CRA that their tax numbers are incorrect. He submitted to the CRA a very sophisticated package which was perfectly backed up and reconciled. As a result of Sam submission, CRA accepted his package with no question asked. Many thanks to Sam and his team. Muhammad ikram Convenience store
M “Moss” T
M “Moss” T
1741360189
Sam and his team helped me to correct my corporate books as a result of the previous accountant sloppy and carless accounting and bookkeeping. He was able to file amended corporate tax returns plus amended personal tax returns under the voluntary disclosure program in a very short of time. He saved me lots of money with his brilliant tax planning and all around creative tax and accounting strategies. I am grateful to his help. His fee is reasonable considering the quality of work that he provided. Don't waste your time by hiring another firm or a tax lawyer. Sam can do it all to your satisfaction.
Asmeret
Asmeret
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Excellent work with respect to a very complicated tax matter with the CRA. Very happy with the outcome. Thank you FARIS CPA with all your help.
Doris Malkowska
Doris Malkowska
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Peggy Lipp
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Asqeri Kasmi
Asqeri Kasmi
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I had a meeting with Sam. He is an expert of the field and very professional. He provides the right solution and the respective plan and works diligently to complete his work on time. He and his staff of CA are experts of the field. Strongly recommended.
While I can’t provide details on my case and I usually don’t like to post Google reviews but I made an exception for Sam Faris. I absolutely recommend Sam to deal with any tax dispute with the CRA. He is efficient, creative and highly knowledgeable and experienced in successfully fighting the CRA. Many thanks Sam.
J Ballan
J Ballan
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Nadeen Awad
Nadeen Awad
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Sam Faris and his team helped me with a very complicated CRA audit. He was very aggressive with his approach and was able to reduce the tax bill big time. My life is back to normal now as CRA case is closed to my satisfaction. Many thanks to Sam and his team.
Sami Haddad
Sami Haddad
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Excellent, well knowlegable team and efficient service. Thanks for all your help.
Rula Haddad
Rula Haddad
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Excellent service..
Atifa Lattif
Atifa Lattif
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Sam Faris and his team helped me with a very complicated audit by the CRA.their approach and the way my case was handled was beyond my expectations.he saved me from getting a significant tax bill and more importantly CRA was convinced with Sam argument and accepted his submission and my case is closed now. I did not have to go through objection and pay more fee and live restlessly anymore.I highly recommend Sam and his team.
Abe Matar
Abe Matar
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Thanks you Sam for all your help. You made the work process very easy to us.
He’s very professional and gave me a lot of advice about taxes and my tuition at university. I highly recommend him!
Sam helped me to file my 10 years personal tax returns. He made the process super easy and stress free. CRA accepted the package with no single question asked. He is highly knowledgeable, down to earth and easy to deal with.
M G
M G
1726589253
I interviewed 5 CPA firms before hiring Mr. Faris. During the initial assessment he was able to identify a huge mistake that CRA has done. He was able to perfectly communicate this mistake with me and explained how this mistake should be corrected. Mr. Faris assured me that the CRA will have to correct this mistake which will result in saving huge amount of taxes and penalties and interest. Mr. Faris worked around the clock including weekends to meet the pressing deadline. In summary, he met all his promises and of course did not disappoint me. All these sleepless nights worrying about the CRA are gone now and of course thanks to Mr. Faris who has changed my mind about the accounting and the tax profession forever.
Ana Miletic
Ana Miletic
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The best CPA and tax firm in the country. Worked with so many CPA firms but Faris CPA is the best by far. Highly professional, knowledgeable, pays attention to details. His fee is very reasonable comparing to other CPAs. I highly recommend the firm.
Dusan Caricic
Dusan Caricic
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Sam was able to sort out my US and Canadian tax returns as a result of errors made by my previous CPA. He was able to identify every little mistake on the returns and saved me taxes and penalties. I highly recommend Sam and his firm for all tax and accounting needs.
T D
T D
1726168345
We approached Sam 10 years ago when CRA was auditing us and our business. Sam was able to handle the audit properly and resolved it to our satisfaction. Since then, Sam has been our family and business accountant. His service is reliable, professional and efficient. Also his fee is reasonable. I already referred to Sam family members and friends who are super happy with his services.
Gerda Saryte
Gerda Saryte
1725833115
MR. Faris has given me a great advice and helped me through complicated tax issues with the CRA.
Sam Faris challenged CRA proposal regarding selling two of my properties. Sam was able to convince CRA that the sale of those properties was not business in nature and not subject to HST. His response was based on detailed analysis and supported with court cases. Many thanks to Sam for saving me money and the hassle with the CRA.
Sterling B
Sterling B
1725482811
Sam is honest and highly responsive. He's a very hard worker and gets things done quickly. I can't recommend him enough.
Peter J
Peter J
1725379584
I recently hired Faris CPA for a tax dispute with the CRA. Sam and his team were very professional and knowledgable in dealing with my concerns and tackled my issue head on. Their communication was particularly noteworthy as they answered all of my questions throughout the process in short time. Definitely recommended.
Brkovic Zorka
Brkovic Zorka
1725358810
Sam Faris is a reliable and highly knowledgeable with what he does. Sam delivered a strong and convincing package to the CRA regarding my case. He worked tirelessly to meet a very tight deadline. He was able to object the CRA decision and knocked down the taxes significantly. I highly respect him on both personal and business levels. He is a man of his word. I will definitely recommend him to family and friends. Many thanks Sam.
Sam deserves all the 5 stars reviews that he already received. He has done an amazing job with regards to my case with the CRA.
Marko Krawcow
Marko Krawcow
1725062049
By far one of the most enjoyable experiences I’ve had with a tax specialist. I can truly say this is the most professional and hardworking person I have ever met. He spared no time getting to work, not only was he extremely efficient but a great communicator. If you’re looking for someone to help you figure out your finances, message Sam. I have no regrets, only wish I had done this sooner.
helene ghaleb
helene ghaleb
1725053083
Working with Sam and his team for the last 7 years has been a pleasure. Their attention to details has been essential in assisting me to navigate complex tax and accounting matters. Sam and his team are always prompt in reply to my questions and fully dedicated to my file. I highly recommend their services to anyone in need of top-notch accounting and tax support.
stjoseph cafe
stjoseph cafe
1724640445
Lucky that I retained Faris CPA to deal with the CRA. I have no complaints whatsoever. My file was dealt with on a timely and efficiently basis. With the least cost.
CIFS Ottawa
CIFS Ottawa
1724638931
The firm performed tax planning to my organization. I am very happy with the results and the performance.
Will Noja
Will Noja
1724517164
I had a consultation with Mr. Fares last week and explained my issue with the CRA. Sam provided a great advice. Further he recommended not to hire a professional and pay money while he thought that I can handle the issues on my own. Obviously he looked at my best interest rather than to pay him more unnecessary fee. He is reliable and trustworthy and I would recommend him to anyone in need for this kind of services.
Sahar Ghantous
Sahar Ghantous
1724511412
Sam helped me to resolve a serious audit with the CRA. Throughout the process, Sam demonstrated skills, knowledge and expertise in accounting and the tax rules. He was able to challenge the auditor and prove why her assumptions were inaccurate.
I feel safe and confident to have Sam and his team as my representative in any future tax and accounting related matters.
Jack
Jack
1724373648
Thanks for your help, amazing service 👍
Working with Sam at Faris CPA was an excellent experience. His deep knowledge and professionalism made navigating a challenging audit with the CRA much easier. Sam was highly responsive, addressing all my concerns and guiding me through every step of the process. I'm very pleased with the service provided and would highly recommend Sam and the Faris CPA team to anyone in need of dependable accounting and tax support.
D C
D C
1724088666
I recently worked with Faris CPA regarding my many years of outstanding personal and corporate tax returns. Sam has submitted all returns under the voluntary disclosure program, he was incredibly helpful throughout the entire process. He was knowledgeable, responsive, and took the time to explain everything in detail. Thanks to his expertise, I felt confident in my decisions. I highly recommend Faris CPA, especially if you have the chance to work with Sam!
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