Calculating the capital gains deferral

The capital gains deferral is available for the disposition of eligible small business corporation shares made in 2024. The investment can be made by an individual in any particular corporation (or related group).

The permitted deferral of the capital gain from the disposition of eligible small business corporation shares is determined by the following formula:

Capital gains deferral = B x (D ÷ E)
where
B = the total capital gain from the original sale
E = the proceeds of disposition
D = E or the total cost of all replacement shares, whichever is less

For dispositions in 2024, report the total capital gain on lines 10689 and 10690 of Schedule 3 for Period 1, and lines 13199 and 13200 for Period 2. Also report the capital gains deferral on line 16099 of Schedule 3 for Period 1 and line 16100 for Period 2. The capital gain you must report in the year of disposition will be determined by subtracting the capital gain deferral from the total capital gain realized from the disposition.

You must use the capital gains deferral to reduce the ACB of each of the eligible replacement shares by the amount determined by the following formula:

ACB reduction = F x (G ÷ H)
where
F = capital gains deferral
G = the cost of replacement shares
H = the total cost of all the replacement shares

Completing your schedule 3

You have to complete Schedule 3 to determine your taxable capital gains or your net capital loss.

For dispostions in 2024, report the total capital gains on lines 10689 and 10690 of Schedule 3 for Period 1, and lines 13199 and 13200 for Period 2.

Also, report capital gains deferral on line 16099 of Schedule 3 for Period 1 and line 16100 for Period 2. The capital gain you must report in the year of disposition will be determined by subtracting the capital gain deferral from the total capital gain realized from the disposition.

Forms and publications

• Guide T4037, Capital Gains
• Schedule 3, Capital Gains or Losses

Related topics

• Line 25400 – Capital gains deduction