Question: If hold a property for 23 years and then sell it, is the income treated as a capital gain or as income?
Answer: Many people wrongly believe that holding a property for a given period of time will ensure the profits on sale are treated as capital, and thus are only 50% taxable, versus treating the gain as income, which would be 100% taxable. Tax case law illustrates this. In Bordine vs. The Queen (2010 DTC 1293 (TCC)) the owner acquired land in 1977, sold it in 2000 yet the amount was still considered income. Intention matters!
While the length of ownership is an indicator, the ownership period is not conclusive. Do not let others tell you that simply by owning the property for two or five years, for example, you are guaranteed a taxable gain. Nothing can be further from the truth.
Knowing, and being able to prove, what you were planning to do with a property at the time of purchase is a key factor in determining whether the CRA will treat the property as a capital gain vs income. Having a discussion, and documenting your intentions, with your accountant can save you considerable taxes down the road.
