Cumulative gains limit (CGL)

A seller who plans to claim the capital gains deduction on a sale of qualifying shares or farm or fishing property meets this limit when completing Form T657. The CRA says to use T657 to calculate the deduction and, if there was investment income or investment expenses in any year from 1988 on, Form T936 to calculate cumulative net investment loss.

How it limits the deduction

Subsection 110.6(1) defines the limit as the amount by which a total drawn from the annual gains limit definition, for the year and earlier years ending after 1984, exceeds a set of reductions. Subsections 110.6(2) and (2.1) cap the deduction at the least of several amounts, and one of them is the cumulative gains limit at the end of the year. The others include the annual gains limit for the year.

What reduces the room

• Amounts deducted under section 110.6 in computing taxable income for earlier years, which can include a past crystallization
• The individual’s cumulative net investment loss at the end of the year
• A deduction for the 1985 year under paragraph 3(e), as the definition lists

Ask the seller’s accountant for the T657 history before any price is set on the assumption of a deduction. See how to crystallize the capital gains exemption before selling.