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Proceeds of Disposition

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When most people hear “proceeds of disposition”, they tend to equate this phrase with sale amount or price paid. For income tax purposes, however, the definition is much broader than the funds or property a seller receives from a buyer in a voluntary sale. This broader definition comes from the broad definition of “disposition” in the Income Tax Act, which includes such events as destruction of property by a natural disaster and expropriation of property by the government. This makes any funds, including insurance proceeds connected to property, to be proceeds of disposition. Additionally, there are deeming rules that determine what the proceeds of disposition are irrespective of the actual funds received on a disposition. For example, non-arm’s length gifts are disposition where the fair market value of the property is deemed received by the person making the gift – possibly giving rise to a taxable capital gain.

FAQS

What does the proceeds of disposition mean?
According to the Canada Revenue Agency (CRA), the process of disposition means the sale price of a property. The proceeds of disposition are the amounts you receive, or that you are considered to have received when you dispose of your property. The proceeds could include compensation you receive for property that someone destroys, expropriates, steals, or damages.
Whom should I call to solve my cra tax issues?
If you are having any CRA tax issues, you can contact the Canada Revenue Agency. Most questions about personal and business taxes can be answered via the automated Tax Information Phone Service (TIPS) at (800) 267-699. You can also speak to a CRA representative concerning your taxes. Make sure to assemble your social insurance number and tax records ready before calling. This information will be required as a proof of identity before discussing matters regarding your account.
How do you calculate proceeds of disposition?
The proceeds of disposition are calculated by subtracting the total of the property’s adjusted cost base and any outlays and expenses incurred in selling your property from the proceeds of disposition. Outlays and expenses refer to the cost of selling the property e.g. repair costs, paying brokers’ fee or surveyors’ fee or legal fee. The adjusted cost base (ACB) refers to the cost of buying the property i.e. the cost of the property plus any expenses incurred to acquire it.
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“My business too got into some trouble and the CRA withheld GST/HST refunds to which I was entitled. One of my friends suggested that I needed to retain a chartered professional accountant and referred me to Sam Faris who dealt with my tax problems in an efficient and timely manner. I have no hesitation in recommending him.”

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