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Lifetime Capital Gains Exemption, part 1in Tax Advice Information and Updates
An eligible individual is entitled to a cumulative lifetime capital gains exemption (LCGE) on net gains realized on the disposition of qualified property. The LCGE also applies to reserves from these properties into income in a tax year.
The capital gains deduction can be applied against taxable capital gains included in 2015 income that arose from:
- Dispositions of qualified small business corporation shares,
- Dispositions of qualified farm or fishing property,
- Reserves brought into income in 2015, from any of the above.
For 2015 dispositions of qualified small business corporation shares (QSBCS), the capital gains deductions limit is $406,800 or ½ of a LCGE of $813,600.
For dispositions before April 21, 2015, of qualified farm or fishing property (QFFP), the capital gains deductions limit is $406, 800 or ½ of a LCGE of $813,600.
For dispositions of QFFP after April 20, 2015, the LCGE has increased to $1,000,000. The additional deduction is calculated as the difference between $500,000 or ½ of LCGE of $1,000,000 and the $406,800 limit.
Please note that the additional deduction can only be used after the $406,800 is used up. This additional deduction does not apply to dispositions of qualified small business corporation shares.
Since the capital gains inclusion rate in 2015 is ½, only 50% of the capital gain from a disposition of property is taxable.
In a year, you can claim any amount of the deduction you want, up to the maximum amount you calculated.
Part 2 of this blog series will focus on the definition of qualified small business corporation shares and qualified farm and fishing property so check back soon!
Need help with your capital gains exemption? Remember, you can always count on KD so contact us today!