Selling your veterinary practice: using the lifetime capital gains exemption
Key takeaways
- The Lifetime Capital Gains Exemption for 2026 is $1,275,000 on a qualifying share sale only.
- An asset sale does not qualify for the exemption. Goodwill and equipment are taxed as regular income or capital gains.
- Goodwill is Class 14.1 at 5 percent declining balance, not your personal rate.
- The share-versus-asset decision is the most consequential choice in a practice sale.
The LCGE in 2026
The Lifetime Capital Gains Exemption lets you sell qualifying shares of a Canadian-controlled private corporation and shelter up to $1,275,000 of capital gains in 2026. That is an indexed increase from $1,250,000 in 2025.
For a veterinarian, a qualifying share sale means you and the buyer agree to sell the shares of your corporate entity, not its individual assets. The shares must meet the qualified small business corporation tests: at least 24 months of holding period and at least 50 percent of the corporation’s assets used in an active business carried on primarily in Canada.
Share sale vs asset sale
| Feature | Share sale | Asset sale |
|---|---|---|
| LCGE eligible | Yes, up to $1,275,000 | No |
| Goodwill treatment | Included in share gain | Class 14.1 at 5% |
| Buyer’s cost base | Sees your old cost base | Fresh cost base on assets |
| Complexity | Higher for buyer | Higher for seller (tax) |
Buyers often prefer asset sales because they get a fresh cost base on tangible assets and goodwill. Sellers prefer share sales because of the LCGE. That tension is the central negotiation in most practice sales.
Goodwill on an asset sale
If you sell assets rather than shares, any goodwill in the practice is treated as a Class 14.1 asset. The proceeds are taxed as a capital gain, half included in income, and the buyer amortizes the purchased goodwill at 5 percent declining balance per year.
That 5 percent rate means the buyer recovers the cost of purchased goodwill slowly, over decades. It is one reason buyers push for asset deals: they want to depreciate equipment faster than they can depreciate goodwill.
Why this matters: the difference between a share sale and an asset sale can be hundreds of thousands of dollars in tax. The QSBC tests need to be met for years before the sale, not just at closing. Planning starts early.
How the exemption works
The LCGE shelters the capital gain on qualifying shares, not the full sale price. If you sell your veterinary corporation shares for $1,500,000 and your adjusted cost base is $100,000, your gain is $1,400,000. The exemption shelters $1,275,000 of that gain. The remaining $125,000 of the gain is taxed, at roughly half the inclusion rate, or about $62,500 included in income.
The exemption is a cumulative lifetime amount. If you used part of it on a previous sale, the remaining room is what is available for this sale.
Frequently asked questions
Do I need to own the shares for a certain time to qualify?
Yes. The shares must have been owned for at least 24 months before the sale, and during that period at least 50 percent of the corporation’s assets must have been used in active business in Canada.
Can I use the exemption on equipment or real estate?
No. Only a share sale qualifies for the LCGE. Selling the building your practice leases to your corporation is a different asset and does not qualify.
What is Class 14.1?
Class 14.1 is the CCA class for purchased goodwill. It is depreciated at 5 percent declining balance per year. That is a slow recovery, which makes share sales more attractive to sellers.
Does the exemption reset if I incorporate a new practice?
The exemption is a personal limit, not a corporate one. If you sell one corporation and start another, the unused portion of your lifetime exemption is still available for the next qualifying sale.
What happens if I sell assets but the buyer calls it a share purchase?
The substance of the transaction determines the tax treatment, not the label. If the buyer is acquiring individual assets, CRA treats it as an asset sale regardless of the agreement’s wording.
Talk to us about your practice sale options at ghumans.ca/veterinary.
General information only. Talk to us about your situation.