Capital Gains Exemption

Many individuals believe that the lifetime capital gains exemption ($800,000 of capital gains deduction) can be simply claimed when they sell their business, however, like most tax items there are many details to consider. 
First the business being sold must be one of the following qualified properties:
  • Qualified fishing properties- These can be fishing assets such as fishing licenses, equipment and boats or shares of a corporation that activities are primarily fishing.
  • Qualified farm properties- These can be farm assets such as land, farm buildings, saw lots and farm equipment or share of a corporation that activities are primarily farming.
  • Qualified Small Business Corporation shares (this also applies to farm and fishing corporations)
    • The shares must be owned by the seller for two years.
    • For the previous two years 50% of the corporation’s assets must have been active business assets
    • At the time of the sale 90% of the corporation’s assets must be used in active business assets.
As you can see above, there is a lot of detail behind the capital gains exemption which if not properly planned for, could cause very severe tax consequences when you sell the shares of your business. 
Cross & Co offers business consulting services. If you would like to have your company reviewed for strategies to ensure that your capital gains exemption is kept intact, please do not hesitate to contact our office.