For which type of properties might lifetime capital gain exemption apply?

The lifetime capital gains exemption (LCGE) is a tax benefit in Canada that allows individuals to exclude a certain amount of capital gains from income tax when they sell certain types of properties. The correct answer focuses on qualified small business corporations (QSBCs).

Qualified small business corporations are those that meet specific criteria set by the Canada Revenue Agency (CRA), including thresholds for total assets and active business income. When shareholders sell their shares of a QSBC, they may be eligible to use the lifetime capital gains exemption, allowing them to exempt a portion of the gains from taxation, thus incentivizing entrepreneurship and investment in smaller businesses.

The other options do not qualify for the same exemption. While capital gains on properties like inherited homes or commercial properties can be subject to capital gains tax, they do not benefit from the LCGE in the same manner that shares of a qualified small business corporation do. In the case of small investment properties, while they may generate capital gains, they also do not fall under the provisions that allow for the lifetime capital gains exemption.

Understanding the specific criteria and intended purpose of the LCGE is crucial for taxpayers in determining which assets can benefit from this favorable tax treatment.