Capital Property

Description: Capital property includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. Capital property does not include the trading assets of a business, such as inventory.

Examples: The following properties are generally capital properties:

• securities, such as stocks, bonds, and units of a mutual fund trust; and
• equipment you use in a business or a rental operation.

Capital property is normally valued at fair market value for tax receipt purposes. In some cases, however, the donor (not the charity) can choose a lower value. The donor can do this where their cost of the property for tax purposes (the "adjusted cost base") is less than fair market value. In this case, the donor may choose which value to use so long as it is:

• no lower than the donor's adjusted cost base;
• no lower than the value of any advantage; and
• no higher than the fair market value.

This rule lets donors choose how much capital gain (if any) they recognize for tax purposes on the donation of the capital property.

Note: If the fair market value is less than the adjusted cost base, the donor does not have a choice: the fair market value must be used.

For further information, see CRA's IT-288.