Income Tax Act subsection 110.6

The Lifetime Capital Gains Exemption (LCGE) allows a taxpayer to receive $800,000 or $1,000,000 of otherwise taxable capital gains on a tax-free basis. The difference in tax-free amounts directly relates to the property that the gain relates to.

The deduction is only available where:

  1. An individual owns qualified small business corporation shares (link to article);
  2. An individual owns qualified farm property (link to article); or
  3. An individual owns qualified fishing property (link to article).

The calculation of the deduction is done on CRA form T657.

The gain must exceed the Cumulative Net Investment Loss (CNIL) to be eligible for the exemption. The CNIL is the amount by which the total of all investment expenses exceeds the total of all investment income.  The CNIL calculation can be done on CRA form T936.