How is a taxable capital gain calculated?

A taxable capital gain is calculated using the formula that takes the fair market value (FMV) of the asset and subtracts the adjusted cost base (ACB). This calculation reflects the increase in value of an asset that is subject to taxation when it is sold. The ACB is essentially what you have invested in the asset, including the purchase price plus any additional costs or improvements made to it.

Thus, the correct formula for calculating a taxable capital gain is: Fair market value - ACB. This result gives you the gain that is subject to taxation. The significance of knowing this calculation lies in understanding how much of the profit from selling an asset is taxable, which is essential for both personal financial management and specific tax obligations. This is particularly important for individuals and businesses in Canada, where these calculations directly influence tax liabilities.