Capital Gains Deduction
If you are reporting a taxable capital gain on line 139 of your income tax return, you may be entitled to a capital gains deduction if you realized a capital gain when you disposed of qualified property or resource property and you meet any of the following conditions:
- You were resident in Canada for the entire year for which you must report a taxable capital gain.
- You were resident in Canada for part of the year in question and the entire previous year.
- You were resident in Canada for part of the year in question and plan to be resident in Canada for all of the subsequent year.
Qualified property includes:
- qualified farm property disposed of before 2014;
- qualified fishing property disposed of before 2014;
- qualified farm or fishing property disposed of after 2013;
- qualified small business corporation shares; and
- incorporeal capital property that is considered qualified farm or fishing property (see the guide entitled Capital Gains and Losses [IN-120-V].
To calculate your deduction, complete form TP-726.7-V, Capital Gains Deduction on Qualified Property.
If, before January 1, 2017, you disposed of capital property that is qualified farm or fishing property, and you are reporting the resulting gain on line 23 or 24 of Schedule L, enter the gain realized on the eligible incorporeal capital amount on line 86 of Schedule G, provided you have yet to reach the capital gains deduction limit and your fiscal period ends on a date other than December 31. Do not include the recovery of annual deductions claimed for previous years. Also complete form TP-726.7-V.
For more information, refer to guide IN-120.
If you disposed of resource property (for example, flow-through shares), you must complete form TP-726.20.2-V, Capital Gains Deduction on Resource Property, to find out if you are entitled to a deduction (and to calculate the amount of the deduction, if applicable).
If the property disposed of is also qualified farm property, qualified fishing property, qualified farm or fishing property, or qualified small business corporation shares, you may not claim the capital gains deduction on resource property for that property unless you have used up the capital gains deduction on qualified property.
If you realized a capital gain on the disposition of qualified shares after March 17, 2016, as part of the transfer of a family business, you must claim a capital gains deduction in respect of the resulting gain. To claim the deduction, complete form TP-726.7-V, Capital Gains Deduction on Qualified Property.
For more information, see the guide entitled Capital Gains and Losses (IN-120-V).