Structural

The Capital Gains Inclusion Rate Increase Was Cancelled. The Underlying Exposure Was Not.

The shift

The 2024 federal budget proposed raising the capital gains inclusion rate from one-half to two-thirds. The effective date was deferred once, to January 1, 2026, then the increase was formally cancelled on March 21, 2025. The rate has remained 50% throughout.

What did not change with the cancellation: deemed disposition on death, the 21-year deemed disposition rule for most family trusts, TOSI's attribution of split income back to the individual who contributed the capital, and the 24-month asset-purity test governing Qualified Small Business Corporation share status. The Lifetime Capital Gains Exemption increase to $1,275,000, 2026, indexed, did take effect and remains current.

Why it matters now

Families who restructured in 2024 anticipating a rate that never took effect are holding structures built for a policy that does not exist. Families who did nothing are unprotected against mechanics that were never proposed, deferred, or cancelled, because they were never conditional on this bill.

Coordinated response

• Audit any 2024 to 2025 restructuring undertaken specifically in anticipation of the rate increase. Determine what should be unwound, what should stand regardless, and what was conflated with permanent planning that still needs doing.
• Confirm current QSBC status for any operating company shares intended to use the $1,275,000 exemption: the 90% active-business-asset test at time of sale, and the 50%-plus test held throughout the prior 24 months.
• Calendar the next deemed disposition trigger for every family trust holding shares. The 21-year clock does not pause for cancelled legislation.
• Model multiplication of the LCGE across family trust beneficiaries at the current $1,275,000 limit, not the pre-2024 figure.
• Review TOSI exposure on any dividend or capital gain flowing to a family member who did not contribute capital or labour to the business.
• Separate planning driven by a headline from planning the structure needs regardless of any headline. Rebuild only the second category.