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Good day Mr. Madan,
I've got a restaurant business that I am interested in selling. However the price that I bought it at compared to the price that I can now sell it at is has a large variance hence I would have to pay a large amount for capital gains. I would be using the funds from the sale to put into another business venture and was wondering if there is some way to minimize the capital gains that I would incur?
I was told that one does not have to pay capital gains if the funds are being used in another active business but I haven't found that to be true with anything I found online.
Thank you for your help.
Hi Amandeep,
Consider selling the shares of your corporation in order to take advantage of the lifetime capital gains exemption (LTGE). If you qualify for the LTGE, then you can avoid paying tax on the first $830,000 (approximately) of profit made on the sale of your corporation's shares. This exemption is available to Canadian shareholders, where the following conditions are met for the corporation being sold:
1. The corporation is a "Canadian controlled private corporation";
2. At the time of sale, not more than 10 of the company's assets are invested in cash and marketable securities;
3. In the 24 months preceding the sale, not more than 50% of the company's assets are invested in cash and marketable securities; and
4. In the 24 months preceding the sale, no one other than the current owner (you) or a person related to you (e.g. spouse), owned the shares of the corporation.