Mr. Ludvig disposed of a capital property for $100,000 on July 1, Year 1. The sales proceeds 4 are payable in 3 instalments: $30,000 at the time of the sale, $35,000 on July 1, Year 2 and $35,000 on July 1, Year 3. 5 6 Other information 7 The ACB of the property for Mr. Ludvig was $20,000 " 10 Required: Calculate the capital gain that will be reported, if any, by Mr. Ludvig in Years 1, 2 and 3. 11 Solution 12 13 In each year the reserve is the lesser of (POD not received in year/total POD) x capital gain; or (20% capital gain 4-number of preceding taxation years after disposition) 140) 15 00 16 17 Calculation of Capital Gain 18 Proceeds of disposition Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 NA NA NOTE: No capital gains reserve is allowed in year 3 as all proceeds have been received by end of year 3 19 Adjusted cost base 20 Capital Gain $ $ $ for years 2 & 3, the prior year's reserve is included in income as a capital gain 21 Capital Gains reserve $ $ 22 Net capital gain S $ $ 23 Inclusion rate 0.50 0.50 050 24 Taxable capital gain 5 $ 25 26 Total Taxable Capital Gain (over 3 years) 27 28 . equivalent to the total taxable capital gain on sale of property (100,000-20,000) 1/21