Proceeds of disposition

Section 54 of the Income Tax Act defines the expression for the capital gains rules. Its list covers several kinds of amounts, not only a sale price, such as compensation for property destroyed or taken.

How it is used

The CRA’s capital gains guide (T4037) says that in most cases proceeds of disposition refers to the sale price of the property. To calculate a capital gain or loss, it says to subtract the property’s adjusted cost base, and any outlays and expenses incurred to sell it, from the proceeds. The guide also explains that proceeds can be deemed: an amount the law treats as received even if the seller did not actually receive it.

What to ask

• How the purchase price is divided among the assets, and whether a tax adviser has reviewed the split.
• Whether any part of the price is a deemed amount under a section of the Act.
• Which selling costs are documented, since the guide allows outlays and expenses to be deducted.
• Whether payment is spread over time, which may raise a capital gains reserve.

For how the gain itself is taxed, see how capital gains are taxed when you sell your business.