capital gains on QSBCS

[kaydo]

I sold QSBCS shares in 2019 for a gain of $199,970. I was paid $22,000. in 2019 and will receive $24,000.

per year for the balance.

I want to spread my gains over five years and claim the taxable amount from my life time exemption.

I am not sure which forms to use or how to fill them in.

[TurboTaxAllen]

Hello,

Tax deferral of QSBCS

First, either TurboTax Online or Desktop through the EasySteps questionnaire will guide you to these steps. You iterated that you are interested in deferring the capital gain on the sale of a QSBCS (“Qualifying Small Business Corporation Shares”) where you will receive a portion of the proceeds now and will receive the balance over a period of time.

To report the sale of QSBCS in Turbo Tax OnLine you would go to the Capital Gains and Capital Gains Deduction Profile in the left side menu under Income > Investments menus. You would then select “Sold Stocks, … sold qualified small business corporations shares …”.  Further options available to select are “Claim a Reserve on disposition of capital property” and “Sold Qualifying Small Business Corporation Shares, …” if applicable.  As you iterate through the screen you will notice that Qualifying Farm or Fishing Property is presented, but in this case is not relevant to your circumstances.

In selecting “Claim a Reserve …” you will be brought to a screen where you will report the amount you are claiming as a reserve.  This is a conditional claim and there are limitations.  There will be additional information required to be completed, including prior year claims. Generally the Gain you would be reporting would be limited to the amount you received and the balance of the calculated capital gain would remain as a reserve. Below you will find a reference for additional  information from the Canada Revenue Agency.

If you want to defer the Capital Gain for a QSBCS in whole or in part, you would have to meet those conditions which require that the proceeds were used to purchase another QSBCS. The proportion of proceeds used to acquire QSBCS would be used to determine the proportion of the capital gain that can be deferred, where for example you used 30% to the proceeds to acquire QSBCS then 30% of the Capital Gain could be deferred.

If applicable you may select “Claim Capital Gains Deduction …” as it may be applicable to the lifetime Capital Gains exemption.

For reference please see:

1) https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-re...

2) https://turbotax.intuit.ca/tips/tax-tip-capital-gains-deferral-6106

3) https://turbotax.intuit.ca/tips/claiming-the-capital-gains-exemption-376