He can exclude up to $250,000 of the gain on the sale of the former family home. The wife might be able to exclude $250,000 depending on when she moved out of the house. One can only use this exclusion once every 2 years, so based on what I understand of the situation, he cannot use the exclusion for the wife's house. However, it MAY not be taxable if the situation with the wife's house was part of the divorce decree. Property settlements which part of divorce aren't taxable. Good luck

I think the suggestion to seek expert tax advice is sound, but I wanted to add something. On the strength of what you have reported here it would seem that you might be looking at nearly 109K of capital gains on the sale, less the cost of doing the subdivision which would include municipal fees, surveys, engineering studies, legal costs and anything connected with getting the land subdivided. However, I don't think it's as simple as that. When you paid 600K for the 85 acres it was a bulk purchase and it seems unlikely that all 85 acres were worth the same amount per acre. On a piece of property as large as that, there is bound to be land that is worth less per are (and therefore has a lower fair market value) because it was farther off the road, or had other development constraints. For that reason, the simple way of determining the basis value of each of the three subdivided acres: $600K divided by 85 (acres) times three, would not be accurate, and probably is misleadingly low. It may be that the land you subdivided was worth more per acre, even before it was subdivided. I suggest that you consider having the property examined by a qualified appraiser (not just a RE agent, unless he or she is also dual qualified as a certified appraiser) to help you determine what the true basis of the land you subdivided. To give a hypothetical example of what I mean: perhaps the three acres you sold were the only "view" lot, or had the only waterfront or access, or had some other very desirable feature of the overall tract. The remaining 82 may still have a decent spot for your new home but the rest may be overlooking the county dump and swamp land to boot. That's why each acre, or lot, needs to be looked at on its own merits, not just valued as if it was all equal. The subdivision almost certainly removed more than 3/85ths of the total value of the tract. A competent appraiser should be able to provide you with sufficient documentation for you to establish a correct basis, which will most likely increase the basis, and therefore reduce your capital gains tax liablity. But keep in mind what you reduce now will affect your basis when you eventually sell your house. However since presumably the new house will be your qualified residence, a large chunk of your potential capital gains will protected (assuming no change in tax code) at that point. HTH, Molly~

Hi again, all you Canadians, Suppose, when the bank stock was at about $105.00, I'd decided to borrow $40.00 using those certificates as collateral (a lot more that the $4.00 original value!), and having certificates issued for the new shares and giving them to the bank to add to the collateral. When the original stock dropped to $68, a drop of about 1/3, (thanks almost entirely to that dratted U.S. sub-prime mortgage debacle - smells a lot like a hot shot lender-generated scam, to me) ... that would have been a real "loss" had I lost my nerve and sold it. If I'd used that $40. to have bought more stock of the same bank (not a good idea - best to own a variety of issues), that $40. stock value bought with the loan, having also declined by 1/3, to $26, would, added to the $68 of the original, produce $92.00 total current value ... more than double the $40.00 that I'd borrowed. So I'd have avoided a margin call on the loan, i.e. bring in some money to reduce the lender's loan to below 50% of total asset value, or more shares to add to the worth of the collateral ... by late today, tomorrow at the latest! And it would have been a lot wiser had I had stocks in about three not only actual companies, but types of industry, used as the collateral: less risky ... or, rather, spreading the risk over a wider area. Also, I still owed the bank $40. .. but the asset that it had bought was now worth only $26. By the way: note this aspect of calculating. The stock price dropped from 105 by a third to 68 ... but it's gotta gain by a half to break even: 68 + 34 = 102. It's a quality stock - it'll recover. I've got time to let it happen ... well, if, at 79, I don't, the executor of my will does. Neither of my major beneficiaries are under any more pressure to liquidate under pressure than am I. The pressure would be to pay income tax, about a year or slightly more later ... and there are other assets at close to real value to take care of that. Or, if everything were undervalued, she could use some of them to borrow to pay the tax, repaying the loan after recovery ... but the trouble with that would be that the loan interest wouldn't be deductible. Further to the rule of 72. At the price of $68., the stock price has doubled from the original $4.00 or so about 4 times: 8, 16, 32, 64. When one divides the 41 year period by the number of doubles, or 4, one gets 10.25, i.e., it took 10.25 years on average to double. Divide 72 by 10.25, one gets 7.02: the growth rate of the basic asset was about 7%. On the other hand, if you know the rate of interest that you expect a certain investment to achieve and divide that number into 72, say, 6%, you'll get a result of 12 ... it'll take your investment about 12 years to double (with no allowance for erosion of the income by tax, or of the value of the asset by inflation). In addition to the approximately 7% growth rate that my bank shares achieved, over the years they paid me about 3% in dividends, for a total growth rate of 10% or so: not too shabby ... especially when it's tax-advantaged, deferred and also tax-advantaged. And the annual rate of dividend grew since my last report to $3.48, which I think that they will make a strong effort to maintain, despite the drop in value of the stock. If they drop it back somewhat, it'll likely hit the stock price for a while, but I won't cry too hard. Earlier, at $105., or 4.5 doubles (8, 16, 32, 64, 128), dividing the 40 years by 4.5 gives 8.888, which is the rate of growth that the stock developed. Add about 3% or a little more of dividends that the shares paid over the years, and you get a total growth rate of close to 12%. I can handle that ... especially when I remember that I pay a low rate of tax on all of those dividends. I use the full amount earned by the loan-purchased stocks, plus part of that earned by my original cash amount invested to pay the interest on the loan, which interest is deductible (as it would not be were I to borrow to purchase an RRSP) and I think that you may get an idea of the reason that I prefer non-RRSP investing in a number of situations. Especially since, were I to cash out at either $105. or $68., after I deducted the $4.00 of original investment, I'd get half of the difference with no tax liability. But every dollar that I withdraw from an RRSP (or successor RRIF after age 69) ... gets added directly to income, and taxed at regular rate. If you can't avoid tax, defer it. But if you can pay some tax now and not only arrange for ongoing income to be taxed at a low rate ... but defer a substantial portion ... and then arrange for a major portion of it to be tax-free ... so much the better. So ... I think that sometimes it makes sense to pay some now, in order to arrange major tax benefits ... not only ongoing ... but later, as well. Not only that, when you have a major portion of your assets in an RRSP ... ... supposing that you need some money during those years of living and want to ask your lender for a loan. Can you use your RRSP assets as collateral for a loan? Officially, no ... unless you have a very accomodating lender, who'll make one without collateral (since they already carry your RRSP). Some will - some won't. Even so, the rate of interest might be higher. Good wishes for increasingly effective management of both your income and your assets. ole joyful P.S. Have you read my thread somewhere around here that outlines how to borrow to invest at almost no net cost (without making any allowance for possible increase in value of the invested asset)? Plus another asking which ordinary person/investor gains from the erosion in value of one's investment by inflation? o j

Hi again everyone, I know that few of them have ever conned others, but ... have you ever conned yourself? Confession time: I just conned myself, big time. I had 20 shares of that stock, and the cashout value is around $70. each. At one time I'd done the math accurately, when I was thinking of sending the shares in to the transfer agent. But then I got thinking about the way that I could avoid (not "evade" - there are big fines and sometimes one goes to jail when found doing that) paying tax on any of the capital gain. Somewhere in there I began thinking that the amount was over $10,000. - which is in the neighbourhood of my charitable contributions of varios types for a couple of years. I'm surprised at myself at how long I went along thinking this - that, while I'd receive the charitable receipt for the full amount from the London Foundation, which was then to issue something like 20 cheques to the various charities, and I'd like two cheques to each, one for this year and one for next year, ... blah, blah, blah. Then - I remebered what the actual amount was - enough for regular contribution to about four of the charities that I regularly support - and that for only this year. Sort of brings one down to earth with a loud "smack". Fortunately, I've funded the account that I write most of the annual cheques from, so can proceed with the usual system, with slight alteration. You can all have a good laugh now, at Ed's (we hope temporary) stupidity!? Hope you all have a lovely, eventful weekend and preparation for the holiday. ole joyful