What is personal use property?
Personal use property (PUP) is as the title suggests, property that is for personal use of an individual. Alternatively, you can think of it as property that is not used in running or maintaining a business.
Examples of PUP
- Cars, motorbikes, boats, etc.
- Other personal items
What happens when I sell PUP?
There are tax consequences when you sell PUP. In Canada, if you sell PUP, half of the gains (profits) are taxed. A caveat is that only gains of $1,000 or above are taxed, anything under this threshold does not need to be reported.
Let’s say you own furniture that you bought for $1,000 and you sold it for $1,500, your gain on the sale is $500. Since the gain of $500 is less than $1,000, you are not required to report this in your tax return and therefore, it is not taxed.
However, there is no tax benefit if you sell PUP at a loss.
Listed Personal Property
Listed personal property (LPP) is property that is considered collectible and does not depreciate in value.
Examples of LPP
What happens when I sell LPP?
The tax consequences are the same as under PUP. However, the difference arises when there is a loss on sale of LPP. For PUP, the loss is of no consequence and does not provide any benefit, whereas, if there is a loss on sale of LPP, the half of loss can be netted against gains on sale of LPP.
If there is no gain on sale of LPP within the year, then the loss can be carried forward 7 years and back 3 years.
Additionally, $1,000 threshold applies to LPP as well, meaning anything gains on sale of LPP under $1,000 does not need to be reported.
So should you care about sale of PUP or LPP? The answer is yes, as you should be aware of tax implications of sale your personal property.