Humber/Ontario Real Estate Course 1 Exam Practice

Capital gains from a taxation perspective include:

1. Profits made from the sale of property held for over ten years.

2. Rental income received from tenants.

3. Profits from the occasional sale of a vacation home.

4. Wages earned from a real estate job.

5. Interest income from savings accounts.

6. Dividends received from real estate investment trusts (REITs).

The correct answer is: Profits from the occasional sale of a vacation home.

Capital gains, from a taxation perspective, specifically refer to the profits made from the sale of an asset that has appreciated in value. This typically includes properties, stocks, and other investments that are sold for a higher price than what they were purchased for. In the context of real estate, profits generated from the occasional sale of a vacation home fall under the definition of capital gains. When a property is bought and later sold at a profit, the difference between the purchase price and the selling price is considered a capital gain. This is particularly relevant for properties held for personal use, such as vacation homes, which may not be classified as a primary residence for tax exemption purposes under certain conditions. The other options do not contribute to capital gains. Profits from the sale of property held for over ten years can generate capital gains, but the key term "occasional sale" specifically highlights the non-recurring nature of that profit realization. Rental income is classified as ordinary income rather than capital gains, wages earned are a form of earned income, and interest income and dividends are categorized under different income types, all of which are treated separately in tax law.