Nothing in the Act limits the exemption to one person per company. Section 110.6(2.1) gives the deduction to “an individual (other than a trust) who was resident in Canada throughout the year”, so more than one individual can claim one. Whether a particular family member can depends on whether the Act treats the gain as that person’s. This page describes the provisions; it is not tax advice.
Key takeaways
SECTION 01 OF 09
The exemption is a deduction from taxable income, claimed by a person. Subsection 110.6(2.1) allows it to “an individual (other than a trust) who was resident in Canada throughout the year” who disposed of a qualifying share. Nothing caps how many individuals claim on one sale.
The amount is indexed. The CRA’s line 25400 page states, under proposed changes, that “for 2025, the lifetime capital gains exemption (LCGE) is $1,250,000 for dispositions of qualifying property”; its indexation table records $1,275,000 for 2026.
Each claimant needs a qualifying share of their own, clearing the definition’s 24-month test. Treadstone Law on multiplying the exemption through a family trust says such a structure cannot be built just before a sale.
SECTION 02 OF 09
Both subsections 110.6(2) and (2.1) run to “an individual (other than a trust)”. A family trust that sells the shares and keeps the proceeds has a gain no exemption can shelter.
Subsection 104(21.2) is the route: where a personal trust designates net taxable capital gains to a beneficiary, that beneficiary is deemed to have disposed of the underlying property — scoped “for the purposes of section 120.4 and for the purposes of sections 3, 74.3 and 111 as they apply for the purposes of section 110.6”.
That scoping is why both rule sets must be read together: the designation handing a beneficiary an exemption-capable gain hands them section 120.4 too. Treadstone Law on trust shares and the exemption says the shares must meet the same tests as under direct ownership, and the T3 designation covers the filing.
SECTION 03 OF 09
Subsection 74.1(1), marginal note Transfers and loans to spouse or common-law partner, deems income from transferred property “to be income or a loss, as the case may be, of the individual for the year and not of that person”.
Subsection 74.1(2) does the same for a transfer “to or for the benefit of a person who was under 18 years of age” who is non-arm’s-length, a niece or a nephew, ending “unless that person has, before the end of the taxation year, attained the age of 18 years”. It attributes income, not gains.
Gains are separate, and for one relationship. Section 74.2, marginal note Gain or loss deemed that of lender or transferor, applies where the recipient is the transferor’s spouse and deems the excess of that person’s gains over losses to be “a taxable capital gain of the individual for the year”. Treadstone Law on attribution draws the same line.
SECTION 04 OF 09
Subsection 74.5(1) disapplies 74.1(1), 74.1(2) and 74.2 only where the transferred property’s value “did not exceed the fair market value of the property received by the transferor as consideration”, where interest on any note taken back is paid at the prescribed rate within 30 days of each year end, and, for a spouse, where the transferor elected out of the rollover.
That election is in subsection 73(1), which rolls property to a spouse at cost “unless the individual elects in the individual’s return of income under this Part” for the year of the transfer “that the provisions of this subsection not apply”. Without it, attribution runs. Related-party pricing is its own subject.
Subsection 74.5(5) fixes the perimeter: a spouse, a non-arm’s-length person under 18, a niece or nephew. Subsection (11) runs the other way: “sections 74.1 to 74.4 do not apply to a transfer or loan of property where it may reasonably be concluded that one of the main reasons for the transfer or loan was to reduce the amount of tax”.
SECTION 05 OF 09
Subsection 75(2) catches retained control, not benefit: a Canadian-resident trust holding property that may revert to the contributor, pass to persons the contributor picks later, or is held on condition “that, during the existence of the person, the property shall not be disposed of except with the person’s consent or in accordance with the person’s direction”.
It takes both halves: income and “any taxable capital gain or allowable capital loss from the disposition of the property” are deemed the contributor’s while that person is resident in Canada. A gain the beneficiaries reported is then the contributor’s, and their exemptions do not apply. Section 74.3 adds a narrower cap where a designated person is beneficially interested in the trust; Treadstone Law on reversionary trusts covers the triggers.
SECTION 06 OF 09
Subsection 120.4(2) is blunt: “There shall be added to a specified individual’s tax payable under this Part for a taxation year the highest individual percentage for the year multiplied by the individual’s split income for the year.”
A specified individual is an individual, not a trust, resident in Canada at year end. Split income begins with “taxable dividends received by the individual in respect of shares of the capital stock of a corporation” other than listed or mutual fund shares — private company dividends.
So the section’s first effect on a family shareholding is to tax its dividends at the top rate unless an exclusion applies, as Treadstone Law’s overview says. Pre-sale dividends carry separate consequences.
SECTION 07 OF 09
The excluded business route is paragraph (e), open from age 17 for an amount “derived directly or indirectly from an excluded business of the individual for the year”. That needs the individual “actively engaged on a regular, continuous and substantial basis in the activities of the business” in the year or in any five prior years, and paragraph 120.4(1.1)(a) deems it met at “an average of 20 hours per week during the portion of the year in which the business operates”. The CRA’s guidance adds that “The five taxation years need not be consecutive.” Outside that deeming the Act gives no test.
The excluded shares route is paragraph (g), open only “if the individual has attained the age of 24 years before the year”. Four conditions: under 90% of the corporation’s business income last year came from services; it is not a professional corporation; the shares “give the holders thereof 10% or more of the votes” at an annual meeting; and they carry 10% or more of the value of all issued shares.
Subsection 248(1) names six professions: “an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor”. The fourth condition uses “all or substantially all”, undefined in the Act; the CRA’s excluded shares page reads it as “All or substantially all (generally this means 90% or more)” and reads the definition as covering “shares of a corporation that are owned directly by an individual”. Neither gloss is in the statutory text; on that reading, trust-held shares are outside the exclusion. Treadstone Law’s note omits the age condition.
SECTION 08 OF 09
The decisive words are paragraph (d) of the “excluded amount” definition: an amount is excluded if it “is a taxable capital gain for the year from the disposition by the individual of property that is, at the time of the disposition, qualified farm or fishing property or qualified small business corporation shares”, “unless the amount would be deemed to be a dividend under subsection 120.4(4) or (5)”.
So a qualifying gain is outside split income at any age. The carve-out is narrow: subsection 120.4(4) reaches someone “who has not attained the age of 17 years before a taxation year” on shares transferred to “a person with whom the specified individual does not deal at arm’s length”, and then “twice the amount is deemed to be received by the specified individual in the year as a taxable dividend that is not an eligible dividend”.
Follow that through: no taxable capital gain remains for subsection 110.6(2.1) to bite on, and a non-eligible dividend is taxed as split income instead. A sale to a family-controlled company also raises section 84.1.
SECTION 09 OF 09
Two provisions in section 110.6 attack late arrangements. Paragraph 110.6(7)(b) denies the deduction where the disposition is part of a series in which property is acquired “for consideration that is significantly less than the fair market value of the property at the time of acquisition”. Subsection (8) denies it where a significant part of the gain is attributable to the fact that “dividends were not paid on a share”.
A third is subsection 74.4(2), which deems a prescribed-rate interest benefit where property is transferred or lent to a corporation and a main purpose was to reduce the transferor’s income and benefit a designated person. Its paragraph (c) applies only where “the corporation was not a small business corporation”. Treadstone Law on corporate attribution explains the deemed interest but not that condition.
One relief is age-based: paragraph 120.4(1.1)(c) deems an amount excluded where it would have been excluded for the individual’s spouse and “the spouse or common-law partner has attained the age of 64 years before the year”. Treadstone Law on the age-65 exception frames the same year as the owner turning 65.
Two boundaries. Both CRA guidance pages cited here describe the December 2017 proposals, and provincial legislation is not addressed. Every provision turns on facts, and none of this is tax advice. Treadstone Law on splitting the exemption between spouses: room cannot be reassigned once a sale is under way.
Only if each of you separately owns qualifying shares of your own that clear the statutory tests. The exemption is personal to each individual under section 110.6, not automatically shared, so each spouse needs shares in their own name meeting the qualifying conditions.
Usually not. Section 74.2 attributes a gain on property transferred to a spouse back to the transferor, and subsection 74.1(2) does the same for income transferred to a non-arm’s-length minor. A gain on gifted shares typically still lands back on the person who made the transfer.
No. Both subsections 110.6(2) and (2.1) apply only to an individual (other than a trust). A trust must instead designate the gain to a beneficiary under subsection 104(21.2), and that beneficiary can only claim the exemption if their own shares meet the qualifying tests.
Sources
