What tax planning should I do before selling a capital property in Ontario?

Pre-sale planning for a significant capital property should ideally begin at least one to two years before the anticipated sale, and in complex cases even earlier. The goal is to understand your expected after-tax proceeds and identify legitimate strategies that might reduce the tax otherwise payable.

Key planning questions include: Does the property qualify for any exemption, such as the principal residence exemption or the lifetime capital gains exemption? Can the sale be timed to straddle two calendar years, deferring some income? Can a capital gains reserve be used if the purchaser will pay in installments? Are there capital losses elsewhere in the portfolio that could offset the gain? Does your spouse or another family member have a lower marginal rate and could any portion of the property be shifted to them without triggering attribution?

For business share sales, the additional question is whether the shares qualify as qualified small business corporation shares for LCGE purposes, and whether any pre-closing restructuring (a "purification") is necessary to pass the asset test. A tax lawyer and accountant working together can model scenarios, identify the optimal structure, and ensure that the necessary steps are completed before the sale is signed.