All taxpayers are entitled to receive a $500,000 lifetime capital gains exemption on gains realized from qualified small business shares or qualified farm property. However, certain items will reduce your capital gains exemption and cause you to pay tax that you might not expect on these gains.
Allowable business investment losses, pre-1985 capital losses claimed against non-capital income, and cumulative net investment losses will all affect your ability to claim the full capital gains exemption.
Have all necessary carry-forward information updated for your 2001 return so that you do not receive a surprise tax bill due to missing these items.
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