Limiting Tax Exposure On An Acquisition By Share Purchase

One characteristic consequence of a share sale is, generally, that the vendor realizes a capital gain. Canadian resident shareholders are generally taxed on half of the amount of the capital gain. If available, the cumulative lifetime capital gains exemption can shelter all or a portion of the capital gain, reducing the overall tax bill of a shareholder.

The cumulative lifetime capital gains exemption entitles every individual who is a resident of Canada throughout the year to a deduction from capital gains realized on the disposition of "qualified small business corporation shares" (QSBC Shares). The deduction allowed is indexed annually. For 2015, the deduction limit is $813,600.