T657 – Calculation of Capital Gains Deduction

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 2023 of qualifying capital property has increased to $485,595 (one half of the $971,190 LCGE for 2023).

For dispositions of QFFP after April 20, 2015, the LCGE is increased to $1,000,000. This additional deduction does not apply to dispositions of QSBCS.

• The limit on gains arising from dispositions in 2022 of qualifying capital property is $456,815 (one half of LCGE of $913,630).

• The limit on gains arising from dispositions in 2021 of qualifying capital property is $446,109 (one half of LCGE of $892,218).

• The limit on gains arising from dispositions in 2020 of qualifying capital property is $441,692 (one half of LCGE of $866,912).

• 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).

Deduction that can be claimed for 2023

For more information, see section "Claiming a capital gains deduction" in Guide T4037, Capital Gains.

When you dispose of QFFP or QSBCS and realize a capital gains deduction, you can claim a capital gains deduction in 2023 that is equal to one of the following amounts, whichever is less:

• your annual gains limit for 2023
• your cumulative gains limit for 2023
• your net taxable capital gains reported in 2023 from dispositions of QFFP or QSBCS, or if you are reporting a reserve in 2023 from the disposition of qualifying capital property
• your maximum capital gains deduction available for 2023

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 up to $485,595 for the 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.

If you are a beneficiary of a trust and have received a T3 Statement of Trust Income Allocations and Designations (T3 slip) from the trust for the 2023 tax year with an amount eligible for the capital gains deduction in box 30, you may include this amount when calculating your capital gains deduction.

The amount in box 30 represents the capital gains from dispositions of QFFP or QSBCS by the trust that occurred in 2023, or from a capital gains reserve claimed by the trust in a previous year. The footnotes area will show that all or part of your allocated capital gain is from dispositions of QFFP or QSBCS, and will indicate whether the gain is for a disposition that occurred in the 2023 tax year, or a previous tax year, of the trust.

If the disposition occurred in the current tax year of the trust, the capital gain should be included in your capital gains being reported for the current year on this form. Capital gains realized by the trust and allocated to you in 2023, are included in the amount on line 10700 or line 11000 of Schedule 3, as applicable. To calculate your capital gains deduction, use Part 3r and Part 3s (as applicable) of this form.

If the disposition occurred in one of the four preceding tax years of the trust, these gains should not be included in Part 3r or Part 3s of this form. Use the applicable parts in this form (as determined on page 5) to calculate the capital gains deduction for gains relating to dispositions that occurred in the 2019 to 2022 tax years (corresponding to the trust's year of disposition

indicated in the footnotes area on your T3 slip).

Example

You received a T3 slip for a trust's 2023 tax year. The footnotes area indicates that the capital gain shown in box 30 is from the disposition of QFFP that occurred in 2021. Based on the questions on page 5 of this form, you should use Part 3n and Part 3o to calculate the capital gains deduction that you may claim in respect to these gains.