James bought a beachfront house in March 2011 for $140,000. After renting the house out for 3 years, he moved into the house in 2013 and it became his main residence for the next 7 years. He sold the house in March 2021 for $260,000. James has prior year net capital losses of $4,000 and current year capital losses of $6,000 from the sale of shares. What is James' net capital gain for the 2021 income year?   a. $26,000   b. $13,000   c. $260,000   d. $120,000

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.