Are the costs of selling shares deductible from the capital gain?

Yes. When the Income Tax Act works out a gain on a disposition, it subtracts two things from the proceeds: the adjusted cost base of the property and any outlays and expenses made or incurred by the taxpayer for the purpose of making the disposition. The CRA’s capital gains guide, T4037, describes the same step. It also says you cannot reduce your other income by claiming these costs, so the deduction lives inside the gain calculation and nowhere else.

What counts as an outlay or expense

The CRA describes outlays and expenses as amounts you incurred to sell a capital property. Its guide lists fixing-up expenses, finders’ fees, commissions, brokers’ fees, surveyors’ fees, legal fees, transfer taxes and advertising costs among the types. The Act’s test is that the cost counts to the extent it was made or incurred for the purpose of making the disposition. If an invoice mixes sale work with other work, ask your accountant how much of it belongs to the sale, and keep the invoices.

How the deduction works in the calculation

The CRA says you have a capital gain when proceeds are more than the total of the adjusted cost base and the outlays and expenses incurred to sell. You have a capital loss when proceeds are less than that total. So the costs of selling can shrink a gain or enlarge a loss. For the wider calculation, see how capital gains are taxed when you sell your business, and for the cost side, the glossary entry on the adjusted cost base.

Share sale or asset sale: whose costs are they?

The Act speaks of costs made or incurred by the taxpayer who makes the disposition. In a share sale, the shareholder is the one disposing of the shares. In an asset sale, the corporation is the one disposing of the assets. If the corporation pays a bill that relates to the shareholder’s sale, or the other way round, ask your accountant which calculation it belongs in. Not every asset in an asset sale is capital property, so also ask how selling costs are split across the assets being sold.