The following instructions are taken from the form.
Use this form if you disposed of qualified farm or fishing property (QFFP) or qualified small business corporation shares (QSBCS) in 2020 or are reporting a reserve in 2020 from the disposition of QFFP, QSBCS, qualified farm property (QFP) or qualified fishing property (QXP). For the definitions of qualified farm or fishing property and qualified small business corporation shares, see the "Definitions" section in Guide T4037, Capital Gains.
Note
You must be a resident of Canada throughout 2020 to be eligible to claim
the capital gains deduction. For the purpose of this deduction, we also
consider you to be a resident throughout 2020 if you were a resident of
Canada for part of 2020 and throughout 2019 or 2021.
Deferred capital gains from the disposition of QSBCS do not qualify for this deduction.
If you have investment income or investment expenses in 2020, complete Form T936, Calculation of Cumulative Net Investment Loss (CNIL) to December 31, 2020, before you complete this form. Form T936 lists what we consider to be investment income and expenses. If you are reporting a reserve claimed on your 2019 return or claiming a reserve for 2020, you also have to complete Form T2017, Summary of Reserves on Dispositions of Capital Property. To get these forms go to canada.ca/cra-forms-publications or call 1-800-959-8281.
What is the capital gains deduction
limit?
If you disposed of QFFP, QSBCS, QFP or QXP, you may be eligible for the lifetime capital gains exemption (LCGE). Because you only include one half of a capital gain in your income, your cumulative capital gains deduction is one half the LCGE.
The total of your capital gains deductions on gains arising from dispositions in 2020 of qualifying capital property was increased to $441,692 (one half of an increased LCGE increased by indexation to $883,384 for 2020).
For dispositions of QFFP after April 20, 2018, the LCGE is increased to $1,000,000.
QSBCS dispositions do not qualify for this additional deduction.
- The limit on gains arising from dispositions in 2019 of qualifying capital property is $433,456 (one half of LCGE of $866,912).
- The limit on gains arising from dispositions in 2018 of qualifying capital property is $424,126 (one half of LCGE of $848,252).
- The limit on gains arising from dispositions in 2017 of qualifying capital property is $417,858 (one half of an LCGE of $835,716).
- The limit on gains arising from dispositions in 2016 of qualifying capital property is $412,088 (one half of an LCGE of $824,176).
- The limit on gains arising from dispositions in 2015 of qualifying capital property is $406,800 (one half of an LCGE of $813,600).
- The limit on gains arising from dispositions in 2014 of qualifying capital property is $400,000 (one half of an LCGE of $800,000).
- The limit on gains arising from the dispositions of qualifying capital property after 2008 and before 2014 is $375,000 (one half of an LCGE of $750,000).
Deduction that can be claimed for 2020
|
Type of qualified property |
Date of disposition |
Applicable ceiling |
|
All types |
After 2008, but before 2014 |
$375,000 |
|
All types |
In 2014 |
$400,000 |
|
Qualified small business shares |
In 2015 |
$406,800 |
|
Qualified small business shares |
In 2016 |
$412,088 |
|
Qualified small business shares |
In 2017 |
$417,858 |
|
Qualified small business shares |
In 2018 |
$424,126 |
|
Qualified small business shares |
In 2019 |
$433,456 |
|
Qualified small business shares |
In 2020 |
$441 692 |
|
Qualified farm or fishing property |
In 2015, before April 21 |
$406,800 |
|
In 2015, after April 20, and from 2016 to 2019 |
$500,000 |
For more information, see the "Claiming a capital gains deduction" section in Guide T4037, Capital Gains.
Qualified farm or fishing property (QFFP), and qualified small business corporation shares (QSBCS)
When you dispose of QFFP or QSBCS and realize a capital gains deduction in 2020 that is equal to one of the following amounts, whichever is lowest:
- your annual gains limit for 2020
- your cumulative gains limit for 2020
- your net taxable capital gains reported in 2020 from dispositions of QFFP or QSBCS or if you are reporting a reserve in 2020 from the disposition of qualifying capital property
- your maximum capital gains deduction available for 2020
There is an election available to you if you own shares of a qualifying small business corporation that stops being a small business corporation because of one of the following reasons:
- a class of its shares is listed on a designated stock exchange
- after 1999, a class of another corporation’s shares is listed on a designated stock exchange
This election will allow you to report a taxable capital gain on your return and claim the $433,456 capital gains deduction, even though you did not actually sell your shares. The deduction applies to any gain you have on these shares to the date the shares are listed. To make this election, complete Form T2101, Election for Gains on Shares of a Corporation Becoming Public. To get this form go to canada.ca/cra-forms-publications or call 1-800-959-8281.
See Also
Schedule 3 – Capital Gains or Losses