Exemption of Certain Assets
23.63. Gains and losses on certain items of personal use such as motor vehicles and household furniture should be disregarded for capital gains tax purposes. Such items will in general depreciate rather than appreciate over time and if brought within the net of capital gains tax would for that reason lead to capital losses. For those few items such as antique furniture and jewellery that may appreciate, the problems in determining the cost of assets which may have been purchased many years before ultimate disposition would often be extremely difficult.
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23.64. The Budget proposals envisage that items of personal-use property originally costing less than $500 will be deemed to have cost $500 for the purpose of assessing any gain on disposition; and where the proceeds of disposition are less than $500 they will be taken to $500, thus limiting the taxable loss to the excess of cost over $500. In addition, under the Budget proposals certain specified personal-use items such as jewellery, coins and works of art will be treated in the same manner as non-personal-use property to the extent that all gains will be subject to capital gains tax but losses will be available to be offset against gains on similar property. The Committee is in general agreement with the philosophy underlying the Budget proposals: personal-use property which normally deteriorates through use should be disregarded for capital gains tax purposes, but property which is as much for investment as for personal use and which may thus appreciate in value over time should not be exempted. Nonetheless there are considerable difficulties in drawing a clear dividing line between the two types of personal-use property. The Committee therefore recommends that while such property as jewellery should be subject to the tax, furniture, even though it may be antique furniture, should be altogether exempt. Furthermore, attention is drawn to the fact that the application of the $500 rule referred to above is likely to give rise to considerable dispute and administrative difficulties in the case of items such as stamps and coins which may be disposed of in sets.