Individuals can still claim a $500,000 exemption against capital gains from qualifying shares of a small business corporation.
To qualify for this exemption, individuals must meet the following conditions:
1) Determination test - The corporation must be an SBC at the time of the sale, all or substantially all (greater than 90%) of its assets must be business assets.
2) Ownership period test - The shares must not have been owned by anyone other than the taxpayer or someone related to the taxpayer during the 2 month period immediately before the sale.
3) Holding period asset test - More than 50% of the corporation's assets (on the basis of fair market value) must have been used in an active business carried on primarily in Canada throughout the 24 month period immediately before the sale.
Full details are described under the Income tax act (ITA) subsections within 110.6.
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Thank you for sharing this valuable information and tips. Your explanation clearly answers in an understandable way and very helpful! This can give better insights and inspiration for small business owners. We would love to see more updates from you.
Tax Specialist
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