The 2024 Federal Budget proposed to increase the capital gains inclusion rate from 50% to 2/3 of the actual gain, effective for capital gains realized on or after June 25, 2024, for all taxpayers (including corporations and trusts) other than individuals. Individuals would be able to continue to access the 50% rate on the first $250,000 of capital gains (net of gains offset by capital losses, the lifetime capital gains exemption, and the proposed employee ownership trust exemption and Canadian entrepreneurs’ incentive) realized annually. An individual’s capital gains over the annual $250,000 limit, and all capital gains of corporations and trusts would be included at the 2/3 rate. Full details of the proposal have not yet been released (as of May 13, 2024).

Corporations and trusts with accrued gains may consider accelerating realizing capital gains before June 25, 2024 to access the 50% inclusion rate. The proposals would not impact individuals who do not realize capital gains in excess of $250,000 annually. However, if an individual is expecting to realize a capital gain greater than $250,000 in a single year, they may consider realizing the gain (or a portion thereof) before June 25, 2024 or spreading the gain over more than one year.

Before accelerating the realization of any capital gains, consideration should be given to the financial non-tax implications of a sale and the prepayment of tax due to early recognition of the sale.

ACTION: Consideration may be given to accelerating realizing accrued capital gains due to the proposed increase in the inclusion rate.