The lifetime capital gains exemption shelters a large amount of capital gain, over $1.25 million, on the sale of qualifying small business corporation shares or farm and fishing property.
When you sell shares of a qualifying small business corporation, the LCGE can shelter more than $1.25 million of the capital gain per individual from tax, a substantial benefit available only on share sales, not asset sales. Qualified farm and fishing property has its own exemption.
Qualifying is demanding: the corporation must meet asset-use tests at the time of sale and throughout a holding period, and the shares must generally have been held for at least two years. Because "purifying" a company to qualify takes time, the LCGE is a reason to plan the structure well before any sale, and a key argument for incorporating.
You sell your qualifying small business corporation for a $1.2 million gain. Using the LCGE, the entire gain can be sheltered from tax, a benefit a sole proprietor selling assets could never access.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
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