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Childhood Treasures - A Heads Up on Capital Gains


Lisa Garland on August 25, 2016 in Income Tax Advice

Snowdon, Wallis. 'Best of the Best' Wayne Gretzky Rookie Card Sells for Record $465K US. Digital image. CBC News. N.p., 5 Aug. 2016. Web. 25 Aug. 2016.

Remember those trading cards that you had so much fun collecting? It might be time to dig those out of storage. A Wayne Gretzky hockey card was recently sold for a record-breaking $465,000 US. Before you cash out though, make sure you are aware of the capital gains tax consequences associated with selling your collector items! Unfortunately, it’s not like winning the lottery.

Your childhood treasures would be considered personal use property, according to the Income Tax Act. Fast-forward twenty-five years: the value of your cards has gone up, and you’re ready to reap the cash benefits. The increase of what you receive from selling these items over what you originally paid will be considered a taxable capital gain. Under the Income Tax Act, you are required to report the capital gain in the year you sold the property. To calculate your capital gain you will need to know the following three amounts:

  1. The proceeds of disposition – what you sold the item for;
  2. The adjusted cost base (ACB) – what you paid for the item; 
  3. The outlays and expenses you incurred to sell the item. 

The capital gain you’d be required to report is the difference between the proceeds of disposition less the property’s ACB and any outlays and expenses incurred to sell your property– simply put #1 less #2 less #3.

There are a couple special rules relating to personal use property. The first is that proceeds of disposition can never be less than $1,000 and the cost of the property can never be less than $1,000. Therefore, if you sell something for less than $1,000, you won’t have a capital gain. The second rule is that if you sell the personal use property for a loss, you cannot create a capital loss. For 2016, half of the capital gain is taxable. More specifically, your income in 2016 would be increased by half of the amount that was just calculated, and you would be required to pay tax on this income. Once your total income is greater than $200,000, you will pay 26.75% tax on your capital gain. Suddenly, the money you’re making is dwindling… be prepared to walk away with less than what you actually sell your collectibles for!