Your client and their spouse are retiring in 2020. They are selling the family home and cottage and are moving into a new home. Details of the home and cottage sales are as follows:

	Year Purchased	Proceeds of Sale	ACB
Family home	2005	$800,000	$380,000
Cottage	1994	$550,000	$50,000

Real estate and legal fees on the sales amounted to $42,000 on the family home and $25,000 on the cottage, respectively

Required:

• Discuss how we would evaluate whether the gain on sale should be considered on account of income or as a capital gain. i.e. what are the key factors
• If the gain is considered a capital gain, what is needed for the properties to qualify for the principal residence exemption.
• Compute the minimum taxable capital gain (assuming they meet the requirements) to be reported for tax purposes for 2020.