What counts as capital property
The CRA describes capital property broadly. It includes depreciable property, and any property that would produce a capital gain or loss if you sold it. Typical examples are securities such as shares, bonds and mutual fund units, a cottage, and the land, buildings and equipment you use in a business or rental operation.
Personal-use property, such as the family car or furniture, is also capital property in the tax sense, but it follows its own rules. Listed personal property, such as jewellery or art, is a separate sub-category with its own loss restrictions. The two linked entries explain how each is treated.
What capital property is not
Trading assets of a business, such as inventory held for resale, are not capital property. A profit on selling them is business income, taxed in full, which is a different outcome from a capital gain. Equipment you use to run the business is capital property, but the stock you sell to customers is not.
Facts matter. When you dispose of Canadian securities, the result could be a gain or loss on income account instead of the more likely capital gain or loss. In the year of the sale, an election on Form T123 lets you treat the gain or loss as capital, and it then applies to every Canadian security you own that year and later years. Traders and dealers in securities cannot make it, and once made it cannot be reversed.
An illustrative example
Suppose you own a small rental property, a portfolio of shares and a boat for weekends. The property and the shares are capital property held for income or investment. The boat is capital property too, but it is personal-use property, so the rules differ, and a loss on it generally cannot be claimed.
Now suppose a friend of yours buys twenty used boats to fix up and resell. Those boats are inventory of a resale activity, not capital property, and the profit is business income. These scenarios are illustrative only; real cases turn on the facts.
Why the label matters, and what to discuss with your accountant
The label decides how a sale is taxed. A sale of capital property is a disposition that may produce a capital gain or loss, calculated from proceeds, adjusted cost base and selling costs. Depreciable property can also be written off through capital cost allowance. You report any disposition on your return, even when no tax is payable.
Keep purchase records, improvement costs and notes on why you held each asset. Ask your accountant whether a particular sale is capital or income, whether the Canadian securities election makes sense for you, and how a change in how you use a property, which can be treated as a sale, affects you.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Definitions for capital gains and lossesCanada Revenue Agency
- Calculating and reporting your capital gains and lossesCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.