Capital gains tax is applied to the financial gain or positive difference between the sale price of an property and its original price. This tax typically applies to investment properties, not a principal residence. The Canada Revenue Agency (CRA) applies a tax of 50% on half of the financial gain when an investment property is sold. There are ways a seller may be able to reduce the amount of capital gains tax paid by choosing the appropriate time to sell, deferring the capital gain or by donating the asset to a registered charity. In addition, if the seller owns a small business, farm or fishing property, it may be possible to use a Lifetime Capital Gains Exemption (LCGE) to offset the capital gains tax. It is highly recommended that you consult a tax expert or lawyer to discuss your options.