Canada Revenue Agency
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Sale of eligible capital property – Sole-proprietor
When you sell eligible capital property, you have to subtract part of the proceeds of disposition from your cumulative eligible capital (CEC) account.
You have to do this calculation if you sold eligible capital property:
- in your current fiscal period; or
- before June 18, 1987, and the proceeds of disposition become due to you in your current fiscal period.
The amount you have to subtract is 75% of the total of these amounts:
- the proceeds of disposition of all the eligible capital property you sell in your current fiscal period; and
- the amount of any proceeds that become due to you in your current fiscal period from eligible capital property you sold before June 18, 1987.
There may be a negative amount (excess) in your CEC account after you subtract the required amount. In this case, you will have to include part of the negative amount in your business income.
Multiply by 2/3 the part of the negative amount in your CEC account that exceeds the annual allowances deducted. To that result, add whichever is less, the excess or annual allowances deducted. This is the amount to include in your business income.
The following example shows how to calculate the amount to include in your business income.
Example
Lysa started her business on January 1, 2005 with a December 31 year-end. In 2005, Lysa bought a client list for $10,000. Lysa sold her business on September 1, 2011. She sold her client list for $15,000 and she does not have any other eligible capital property in her business. She deducted annual allowances each year as follows:
| 2005 | $ 525 |
| 2006 | 488 |
| 2007 | 454 |
| 2008 | 422 |
| 2009 | 393 |
| 2010 | 365 |
| Total | $ 2,647 |
The amount included in Lysa's business income on line 8230 on Form T2125, Statement of Business or Professional Activities, is the total of amounts A and C:
| Calculation of amount A: | ||||||||
| The lesser of i) or ii): | ||||||||
| i) | Excess amount calculated as follows: | |||||||
| Proceeds of disposition: $15,000 $15,000 × 75% |
$ | 11,250 | ||||||
| Plus: total annual allowances deducted | 2,647 | |||||||
| $ | 13,897 | |||||||
| Minus: 75% of eligible capital expenditures $10,000 × 75% |
$ | 7,500 | ||||||
| Excess amount | $ | 6,397 | i | |||||
| ii) | Total annual allowances deducted | $ | 2,647 | ii | ||||
| The lesser of i) or ii): | $ | 2,647 | A | |||||
| Calculation of amount B: | ||||||||
| Excess amount | $ | 6,397 | ||||||
| Minus: total annual deductions taken | 2,647 | $ | 3,750 | B | ||||
| Calculation of amount C: | ||||||||
| Line B × 2/3 | $ | 2,500 | C | |||||
| Line A plus line C | $ | 5,147 | ||||||
The amount to be included in Lysa's business income on line 8230 is $5,147.
