Lifetime Capital Gains Exemption

Question 1

Lifetime Capital Gains Exemption

Answer 1

In order to claim the Lifetime Capital Gains Exemption (LCGE) on the sale of shares the following criteria must be met:
1. The corporation must be a small business corporation.
a. A small business corporation is a Canadian Controlled Private Company (CCPC), in which all or substantially all (90% test) of the fair value of its assets (including unrecorded assets but excluding liabilities) are used primarily in an active business carried on primarily in Canada.
2. Over a 24 month period preceding the sale of shares, more than 50% of the fair market value of the assets must be used in earning active business income, primarily in Canada.
3. Over a 24 month period preceding the sale, no one other than the shareholder, or someone related to the shareholder, can have held the shares.
Note: Certain farming and fishing property will also qualify for the exemption. This is not an additional exemption, but an additional type of property which can qualify for the tax benefit.

Reference: ITA 110.6