Maggie bought a house which was quite a dump in 1993 for $85,000. She fixed it up with paint and wallpaper but in 1996 she did a major renovation which cost her $30,000. In 1997, she bought a dump of a cottage for $60,000 because it was both on a lake and near some good cross-country ski trails. She winterized it immediately for $10,000. Over time, the dumpy cottage has become quite attractive with the addition of a new roof, siding, windows and doors all of which cost $10,000 in 1998. In addition, she is fond of landscaping and has created quite a beautiful garden. I might add that Maggie has only $50,000 in RRSPs since she prefers to sink her money into her living space.

In July 2012, Maggie lost her job and received $70,000 in severance pay. She put as much as she could into her RRSP (included in the $40,000 above) and put the rest in GICs to help finance her plan. Maggie had been taking courses for several years to become a Master Gardener.

When she lost her job, she decided to live out her dream of having a gardening business where she would design gardens for others with cottages near her and maintain them if they needed it because they mostly come to their cottages on the weekend to relax. In the winter, she will keep the lanes clear (with her snow blower) and check up on the cottages now and again. She gave her corporate clothes to her friend Kate with the provision that she could stay with her when she comes to the City (which wont be often because she is very fed up).

When she lost her job, she immediately started renting out the house for $1,700 a month plus utilities. She still has to pay the $2,300 a year taxes and maintenance but figures the house will be her retirement fund. When she started renting out the house, it immediately ceased to be her principal residence her cottage is now her principal residence. In July 2012, her house was worth $420,000 and the cottage was worth $270,000. Real Estate Prices have been increasing by 2% from 2012 onwards till date. She has sold both the properties in 2021.

Question:

Note:

You must show all the work including formula, reasoning and calculations in order to get full marks.

Calculate taxable capital gain on the sale of the House?

Calculate taxable capital gain on the sale of the Cottage?