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Lifetime Capital Gains Exemption—Good Planning Pays Off

Lifetime Capital Gains Exemption—Good Planning Pays Off

Learn about the Lifetime Capital Gains Exemption with KPMG's new Enterprise Tax on Demand webinar


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As a business owner, you've probably heard about the lifetime capital gains exemption that can apply to the sale of qualifying private company shares. If you and your family members can claim this exemption when you sell the shares of your business, you could each realize substantial tax savings, providing that the shares you're selling meet certain requirements.

Every individual is entitled to a lifetime "capital gains exemption" on qualifying small business shares (and farm and fishing property). This exemption, which is indexed for inflation annually, is limited to a lifetime amount of $848,252 for 2018 (and $866,912 for 2019). It's important to note that you don't have to claim the exemption all at once - you can carry forward any unused amount to use in the future.

To be eligible for the exemption, the shares must be "qualified small business corporation shares". This generally means that you must have owned the shares for the two years before you sell them, and at the time of the sale, substantially all (meaning 90% or more of the value) of the business's assets must be used for carrying on an active business in Canada or the assets must be shares or debt in other qualifying small business corporations, among other considerations. Good planning can help you and your family members, who own shares in your private company, ensure the shares are eligible for the capital gains exemption.

Although the government recently proposed changes to limit access to this exemption as part of its private company tax changes first announced in 2017, it ultimately abandoned those changes. That's good news for small business owners, since the capital gains exemption can leave you with more money in your pocket, as long as you pay careful attention to making sure your company's shares qualify.

To help you get acquainted with this important tax exemption, KPMG presents "Lifetime Capital Gains Exemption: How do I benefit?", the latest webinar in KPMG's new Enterprise Tax on Demand series. This webinar focuses on

  • What is the LCGE
  • What the LCGE is worth
  • How you can qualify
  • How you can utilize the LCGE of family member shareholders
  • What to watch out for.

Other upcoming short and specific Enterprise Tax on Demand webinars will focus on other important tax-related areas of your business, including Scientific Research and Experimental Development (SR&ED) and structuring a business.

To learn more about how the Lifetime Capital Gains Exemption impacts you, please contact Dino Infanti or visit our website KPMG private company tax to learn more.

Information is current to February 12, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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