Sarah, a 55-year-old business owner, is considering selling her shares in her Canadian-controlled private corporation (CCPC). The shares have an adjusted cost base (ACB) of $100,000 and a fair market value (FMV) of $1,200,000. Her corporation's assets primarily consist of active business assets. She has never used her Lifetime Capital Gains Exemption (LCGE). How much capital gains exemption can Sarah claim if she sells her shares in 2023?

Question: Sarah, a 55-year-old business owner, is considering selling her shares in her Canadian-controlled private corporation (CCPC). The shares have an adjusted cost base (ACB) of $100,000 and a fair market value (FMV) of $1,200,000. Her corporation's assets primarily consist of active business assets. She has never used her Lifetime Capital Gains Exemption (LCGE). How much capital gains exemption can Sarah claim if she sells her shares in 2023?

Answer options: ✅ $971,190

• $892,218
• $1,100,000
• $0

Correct answer: $971,190

Explanation: For 2023, the Lifetime Capital Gains Exemption (LCGE) limit is $971,190. Since her capital gain is $1,100,000 ($1,200,000 - $100,000) and her shares qualify as Qualified Small Business Corporation (QSBC) shares, she can claim the full LCGE amount.