The Canadian Federation of Independent Business (CFIB) is urging the federal government to put an end to excluding family members from the lifetime capital gains exemption when business owners sell their companies to family members.
What is the lifetime capital gains exemption (commonly known as the LCGE)?
It is a tax free income �zone� created for the benefit of small business owners. It is available to each qualifying shareholder of a qualifying business that sells in a qualifying transaction!
The tax free zone eliminates tax on qualifying capital gains when you sell your shares � in 2020 up to $883,384 (per shareholder), saving up to $230,000 in tax. Structured properly, when allocated to multiple family members, the tax zone can be multiplied.
The best time to do this structuring? As the first shareholder�s share value approaches the tax sheltered limit. The best time to make sure the business will �qualify�? Immediately, because if a shareholder passes away, the shares are considered �sold� by CRA and the estate can benefit from the tax shelter.
Unfortunately, the LCGE rules (unfairly) do not apply to sales within families � a huge barrier to generational succession planning.
How do you feel about these proposed changes? Do you think it is a win for small business owners?
Let�s Start A Conversation today to discuss how these changes are affecting your financial future.
Submitted by Jim Pelot, B.Comm, CPA, CA; CFO and Co-Founder of Podium Prosperity Group and p|w|m Advisory Group
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