Capital gains deferral for investments in small businesses

If you realize a capital gain on the disposition of shares of a small business corporation, you may be able to defer tax on the capital gain if the proceeds from the disposition are reinvested in another eligible small business investment. Eligible investments are newly issued common shares in an SBC with assets not exceeding $50 million after the investment.

To qualify, the shares disposed of have to satisfy certain criteria, and the proceeds must be reinvested in the eligible small business within 120 days after the end of the year.

There is no limit to the amount of the gain that can be deferred. The cost base of the new investment is reduced by the capital gain deferred.