Lifetime Capital Gains Exemption

Question 1

How is LCGE utilized?

Answer 1

• applied against CG from QSBC or qualified fishing and farming property
• QSBC max = $892,218 (indexed to inflation)
• farming and fishing max - $1mil (not indexed to inflation)

Question 2

LCGE claimable = Lesser of…

Answer 2

1) unused lifetime deduction (($892,218 * 50%) - PY claims)
2) annual gains limit ((lesser of: taxable gains in the year total OR taxable gains of LCGE qualified property total) - (net capital loss > the first amount + ABIL during the year)
3) cumulative gains limit (annual gains limits for CY and PYs - total CG deductions in PYs - net investment loss balance at the end of the current year)

Question 3

Unused LCGE

Answer 3

= (limit of $892,218 x 50%) - PYs claims

Question 4

QSBC share criteria

Answer 4

• owned by taxpayer/spouse/related partnership and …
  1) small business corporation test is met and SBC at the time of sale (90% test: 90% of FMC of assets are at least 50% used for business or invested in SBC)
  2) Holding period test (must not have been owned by anyone other than the taxpayer or related person in the past 24 months)
  3) Basic asset test (throughout 24 month period, more than 50% of the FV of assets must have been used primarily in active business in canada)