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T657 Tax Form: Calculation of Capital Gains Deduction

What is the T657 tax form?

It is titled Calculation of Capital Gains Deduction. In Canada, the maximum Lifetime Capital Gains Exemption (LCGE) depends on the type of property disposed. For 2016, the maximum LCGE for qualified farming/fishing property is $1,000,000. Qualifying small business corporation shares carry a LCGE of $824,176. Since 50% of capital gains are taxable, the LCGE cap for each type of disposal is one half of the maximum ($500,000 for qualified farming/fishing properties and $412,088 for small business corporation shares). 

You will use this form if you disposed of qualified farm property or qualified small business corporation shares in the current taxation year or in a previous year, or if you disposed of qualified fishing property after May 1, 2006.  

What is a capital gain?

A capital gain is what you received when you sold that investment minus what you paid for an investment. If you made a profit, you have a capital gain. If you lost money, you have a capital loss. The investment can be stocks, mutual funds, bonds, real estate, precious metals, coins, fine art, and other collectible items. 

Are there other conditions to claim a capital gains deduction?

You have to be a resident of Canada throughout the current tax year. For the purpose of this deduction, the CRA will also consider you a resident throughout the year if you were a resident of Canada for part of the current tax year and throughout the previous or the following tax year. 

How do I calculate the capital gains tax deduction?

If you have disposed of qualified farm property, qualified fishing property, or qualified small business corporation shares and you have a capital gain, you can claim a capital gains deduction in this tax year that is equal to the lowest of the following amounts:

  • Your annual gains limit for this tax year
  • Your cumulative gains limit for this tax year
  • Your net taxable capital gains reported in this tax year from dispositions of qualified farm property, qualified small business corporation shares, and qualified fishing property disposed of after May 1, 2006
  • Your maximum capital gains deduction available for this tax year

To view form T657, click here. For the definitions of qualified farm property, qualified fishing property and qualified small business corporation shares, see Guide T4037, Capital Gains.

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