What happens if my company's non-active assets push me just over the purification threshold?

If non-active assets — excess cash, investments, or property not used in the business — push your corporation's asset mix past what's needed to qualify as a small business corporation, your shares can lose access to the exemption on the whole gain, not just on a proportionate piece of it tied to those assets. This is a real cliff-edge risk: being just barely over the line can have the same effect on exemption eligibility as being well over it.

The practical response, if this is caught before a sale closes, is purification: removing or restructuring the offending non-active assets so the corporation's asset mix falls back within the qualifying range before the sale is finalized. This is commonly done by paying out cash as dividends, using it to pay down debt, or transferring non-active assets to a separate holding company in exchange for shares, ideally with enough lead time before closing for the change to actually be reflected in the corporation's asset mix, not just promised on paper.

Because this test is measured over time as well as at the moment of sale, and because purification done too late or too hastily can create its own complications, this needs a tax advisor's calculation well before you're at the negotiating table.