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ARTICLE · 08 JUNE 2007

2007 Budget - Capital Gains Exemption Clarification

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The March 19, 2007 Federal Budget ("Budget") introduced proposals to increase the capital gains exemption from $500,000 to $750,000.

CanadaTax
Simon Labrecque
Simon Labrecque
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The March 19, 2007 Federal Budget ("Budget") introduced proposals to increase the capital gains exemption from $500,000 to $750,000.

Although the Budget papers state that the increased deduction will apply to dispositions that occurred after March 19, 2007, there was some confusion that transitional rules may limit the deduction for the year 2007 to $625,000 rather than $750,000.

Effectively, the Budget paper states that for the taxation year 2007, an individual’s capital gains exemption will be determined as the sum of:

  1. The individual's pre-budget capital gains exemption for the year as if the individual's capital gains exemption limit remained at $500,000 of capital gains; and

  2. The amount (not exceeding $125,000) by which the increase in the individual’s cumulative gains limit at the end of the year that is attributable to the net taxable gains from dispositions of qualified property on or after March 19, 2007 exceeds the individual's pre-budget gains exemption.

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