If you sell shares of a qualified Canadian small business corporation, the maximum lifetime capital gains exemption (in 2017) is $835,716. Only half of this amount is taxable due to capital gains being taxed at 50% of regular income, making the current capital gains deduction limit $417,858. Owners of small business corporations, some farmers, and some fishers are eligible for the LCGE.
As of 2015, and due in no small part to CFIB lobbying, the LCGE is indexed to inflation. Also since April, 2015, the LCGE amount for farmers and fishers has been raised to $1million and will remain there for the time being. CFIB continues to lobby for this amount to be in place across the board for all small businesses.
While the LCGE generally applies to the sale of qualifying shares of a Canadian small business corporation and not to the sale of assets, some farm assets/property may also be eligible for the LCGE at disposition. However, it is generally possible to “roll” your business assets into a corporation and then sell the shares. There are conditions to be met in order to be eligible for the exemption, some of which must be met continuously over a 24-month period.
More information on the LCGE can be found on this handout prepared by Danielle Sideris. Due to the complex requirements for eligibility, we recommend you speak with an accountant and/or lawyer prior to selling shares or changing your business structure.
Have questions? Members can contact Business Resources at 1-888-234-2232 or [email protected]