Tech Startup Sale LCGE Calculator 2026 New Brunswick: Your Exact Number by Income, Age, and Province
Quick Answer
A Moncton-based tech startup founder, age 45, sells the incorporated SaaS company for $5,000,000 (share sale). Adjusted cost base: $100,000. Capital gain: $4,900,000. The 2026 LCGE (~$1,250,000) shelters the first $1,250,000 on QSBC shares — leaving $3,650,000 of exposed gain. At 50% inclusion (ITA s. 38(a)), that’s $1,825,000 of taxable income. New Brunswick’s top combined federal + provincial rate of approximately 53.30%: roughly $972,725 in capital gains tax on the exposed portion. Without the LCGE, the tax bill would be approximately $1,305,850. The LCGE saves approximately $333,125. But the remaining $972,725 bill is not fixed — an installment reserve under ITA s. 40(1)(a)(iii) can spread the exposed gain over up to 10 years, potentially saving $80,000–$140,000 in bracket arbitrage. This calculator shows your exact number.
Key Takeaways
- 1The LCGE shelters approximately $1,250,000 of capital gains on QSBC shares in 2026 (ITA s. 110.6). On a $5M tech startup sale with a $4.9M gain, the LCGE covers about 26% of the gain — leaving approximately $3,650,000 exposed. Without LCGE qualification, the full $4.9M gain is taxable, producing roughly $1,305,850 in tax at New Brunswick’s top combined rate.
- 2New Brunswick’s top combined federal + provincial marginal rate is approximately 53.30% (federal 33% + NB top rate of 20.30% on income above approximately $185,064). On capital gains at 50% inclusion, the effective tax rate on the gain itself is approximately 26.65%.
- 3Tech startups face a specific QSBC trap: IP held outside Canada, excessive cash from prior funding rounds, and holding-company structures can all disqualify shares from the LCGE. The 90% active-business asset test (at time of sale) and the 50% test (24-month lookback) must both be met — and tech companies with retained cash or passive investments commonly fail.
- 4The capital gains inclusion rate in 2026 is a flat 50% for all individuals, corporations, and trusts (ITA s. 38(a)). The proposed 66.67% rate above $250K was cancelled March 21, 2025 by the Carney government. Every calculation in this article uses the confirmed 50% flat rate.
- 5The capital gains reserve under ITA s. 40(1)(a)(iii) allows spreading the exposed gain over up to 10 years for QSBC shares. On $1,825,000 of taxable income from a lump-sum sale, spreading it over 10 years can save $80,000–$140,000 by keeping annual income below the top bracket.
- 6Both spouses can each use their own ~$1,250,000 LCGE on the same sale if both hold QSBC shares. A couple could shelter up to ~$2,500,000 of the $4,900,000 gain — dropping the tax bill by roughly $333,000 more. Share reorganization must happen at least 24 months before the sale.
The Scenario: $5M SaaS Startup, Moncton, 8 Years from Founding to Exit
A 45-year-old Moncton tech founder. She built an incorporated SaaS company serving Atlantic Canadian logistics firms — 30 employees, a Dieppe office, and $1.8M in annual recurring revenue. A Toronto-based private equity firm has offered $5,000,000 for the shares. Adjusted cost base of her shares: $100,000 (the initial incorporation costs plus some early sweat-equity shares). Capital gain: $4,900,000. For the broader mechanics of how capital gains tax works in Canada in 2026, start there.
The LCGE covers approximately $1,250,000 of that $4,900,000 gain — leaving $3,650,000 exposed. The structure of the deal determines whether her tax bill is $972,725 or closer to $830,000. That's a $142,000 spread on the same sale with the same buyer. Two scenarios on the table: lump sum at closing vs. installment reserve over up to 10 years.
Your Numbers: Tech Startup Sale LCGE Calculator
Plug in your sale price, cost base, other income, age, and province. The calculator shows your exact after-tax proceeds under the 2026 LCGE — including a lump-sum vs. reserve comparison.
Tech Startup Sale LCGE Calculator
Canada 2026 · 50% inclusion rate (ITA s. 38(a)) · LCGE ~$1.25M on QSBC shares (ITA s. 110.6)
Your Numbers
Capital Gain
$4,900,000
LCGE Shelter Applied
$1,250,000
Exposed Capital Gain
$3,650,000
Taxable Capital Gain (50% inclusion)
$1,825,000
Tax Estimate (Lump Sum)
Estimated Capital Gains Tax
$972,725
After-Tax Proceeds
$4,027,275
Effective Tax Rate on Gain
19.9%
Reserve Comparison
If you spread this gain over 10 years using the capital gains reserve (ITA s. 40(1)(a)(iii)):
10-Year Reserve Total Tax
$841,407
Potential Savings vs Lump Sum
$131,318
Illustrative estimate only. Uses simplified bracket approximations. The 50% capital gains inclusion rate and ~$1.25M LCGE are confirmed for 2026 (ITA s. 38(a), s. 110.6). Actual tax depends on your full return, deductions, and credits. Consult a tax professional for your specific situation.
Step 1: Confirm the LCGE Shelters the First $1.25M
The Lifetime Capital Gains Exemption under ITA s. 110.6 applies to qualifying small business corporation (QSBC) shares. Three tests must all be met — and tech startups have a specific pattern of failure on each.
The Three QSBC Tests — Tech Startup Edition
Test 1 — 90% active-asset test (at time of sale): At least 90% of the corporation's assets, by fair market value, must be used in an active business carried on primarily in Canada. Tech startup trap: cash from prior funding rounds sitting in a corporate savings account is a passive asset. A SaaS company with $2M in retained earnings in a high-interest savings account and $3M of goodwill/IP might be at 60/40 — failing the test.
Test 2 — 50% active-asset test (24-month lookback): More than 50% of assets must have been active-business assets throughout the 24 months immediately before the sale. Tech startup trap: if the company raised venture capital 18 months ago and parked the cash, the lookback period catches that passive asset composition.
Test 3 — 24-month holding period: The shares must have been held by you (not a holding company or trust) for at least 24 months. Tech startup trap: founders who reorganized shares into a holdco for liability protection may have reset the clock. Shares must be held personally.
Our Moncton founder passes: the SaaS company's assets are almost entirely active-business (customer contracts, proprietary software IP, receivables, a small amount of office equipment). She stripped excess cash as a dividend 30 months ago on her accountant's advice — restoring the 90% ratio with a clean 24-month lookback. She's held the shares personally since incorporation in 2018. The LCGE shelters the first $1,250,000 of the $4,900,000 capital gain. Tax on that portion: $0.
The remaining $3,650,000 of capital gain is where the payout structure matters. At 50% inclusion (ITA s. 38(a) — the proposed 66.67% rate was cancelled March 21, 2025), that's $1,825,000 of taxable income.
Option 1: Lump Sum — Take the Full $5M at Closing
Lump-Sum Tax Calculation (New Brunswick)
| Item | Amount |
|---|---|
| Sale price (shares) | $5,000,000 |
| Adjusted cost base | $100,000 |
| Capital gain | $4,900,000 |
| LCGE applied (ITA s. 110.6) | ($1,250,000) |
| Remaining capital gain | $3,650,000 |
| Taxable capital gain at 50% inclusion | $1,825,000 |
| Approximate capital gains tax (NB top combined ~53.30%) | ~$972,725 |
New Brunswick's top combined federal + provincial marginal rate is approximately 53.30% (federal 33% + NB 20.30% on income above ~$185,064). The $1,825,000 of taxable income lands deep in the top bracket. Source: CRA federal tax brackets 2026; NB Finance personal income tax rates.
After-tax proceeds: $5,000,000 − $972,725 = approximately $4,027,275. The LCGE saved her approximately $333,125 (the tax she would have owed on the sheltered $1,250,000). Without QSBC qualification, the full $4.9M gain at 50% inclusion would have produced approximately $1,305,850 in tax — after-tax proceeds of only $3,694,150.
When Lump Sum Makes Sense for Tech Founders
Take the lump sum if: (1) the PE buyer requires a clean closing with no deferred payments — common in competitive tech acquisitions, (2) you need capital immediately for your next venture, or (3) you have large RRSP room or prior-year losses to offset part of the income. On a $5M exit, the simplicity of a clean close often outweighs the $80K–$140K potential savings from a reserve. But if the buyer will agree to installment terms, run the numbers below.
Option 2: Installment Reserve — Spread the Exposed Gain Over Up to 10 Years
Under ITA s. 40(1)(a)(iii), when you sell QSBC shares and receive payment over time, you can claim a capital gains reserve — deferring a portion of the gain to future years. For QSBC shares, the reserve extends up to 10 years (vs. 5 years for non-QSBC). You must include at least 10% of the gain each year.
The LCGE is applied first (sheltering $1,250,000). The remaining $3,650,000 of gain is then spread across the installment period. Over 10 years: $365,000 of capital gain per year, producing $182,500 of taxable income per year at 50% inclusion.
Installment Reserve: 10-Year Spread (New Brunswick)
| Year | Capital gain recognized | Taxable income (50%) | Approx. marginal rate | Tax on this tranche |
|---|---|---|---|---|
| Year 1 | $365,000 | $182,500 | ~53.30% | ~$97,273 |
| Year 2 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 3 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 4 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 5 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 6 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 7 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 8 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 9 | $365,000 | $182,500 | ~45% | ~$82,125 |
| Year 10 | $365,000 | $182,500 | ~45% | ~$82,125 |
| 10-Year Reserve Total Tax (approximate) | ~$836,398 | |||
Year 1 assumes existing income stacking ($150K salary + $182,500 capital gain = top bracket). Years 2–10 assume the founder has retired or reduced income — the annual $182,500 of taxable gain lands in the ~45% combined bracket instead of the top 53.30%. Actual savings depend on other income in each year. Source: ITA s. 40(1)(a)(iii); CRA capital gains reserve rules.
Reserve Savings: ~$136,327
Lump-sum tax: ~$972,725. Ten-year reserve tax: ~$836,398. Savings: approximately $136,327. That's the bracket-arbitrage value of spreading $1,825,000 of taxable income over a decade instead of hitting the top bracket in one year. The reserve requires genuinely deferred payments — the buyer must owe you money across those years. You can't take the full $5M at closing and still claim the reserve.
The QSBC Purification Problem for Tech Startups
Tech companies are the highest-risk sector for failing the 90% active-asset test. Here's why: a profitable SaaS business generates cash faster than it deploys capital. Unlike a manufacturer with $2M in equipment or a retailer with $1M in inventory, a software company's primary assets are intellectual property, customer contracts, and goodwill — plus a growing bank balance.
A tech company with $5M in fair market value might have $1.5M of cash in a corporate bank account and $3.5M of goodwill/IP. That cash is a passive asset. Ratio: 70% active / 30% passive — fails the 90% test. The LCGE is gone. Tax bill jumps from $972,725 to $1,305,850. A $333,125 loss because of a bank balance.
The Fix: Pre-Sale Dividend to Strip Excess Cash
The standard play is to pay yourself a dividend to remove the excess cash from the corporation before the sale, restoring the 90% active-asset ratio. But this restarts the 24-month clock on the 50% lookback test (Test 2). If you strip the cash today, you need to wait 24 months before selling for the LCGE to apply. For a tech founder who just received an acquisition offer, that timing pressure is real. The purification should happen the moment your company becomes profitable enough to accumulate excess cash — not when the offer arrives.
NB-Specific Considerations: Corporate Rates and Post-Sale Planning
New Brunswick's corporate tax rates are relevant if you're considering leaving proceeds inside the corporation:
NB Corporate Tax Rates (2026)
| Category | Combined rate (federal + NB) |
|---|---|
| Small business (active income up to $500K) | 11.5% |
| General corporate rate (active income above $500K) | 29% |
| Investment income (passive) inside corporation | ~50.67% (refundable) |
Source: NB Finance corporate income tax rates; CRA Refundable Dividend Tax on Hand (RDTOH) rules.
If you leave the $5M sale proceeds inside the corporation and invest passively, the corporate investment tax rate of ~50.67% (refundable) means roughly half your annual investment returns are taxed upfront — though a portion is refunded when you pay dividends. The integration principle means total tax (corporate + personal on dividend extraction) is designed to approximate what you'd pay receiving the income personally. Over 10+ years, the deferral can create a compounding advantage, but it's not a tax-elimination strategy.
Share Sale vs. Asset Sale: Why It Matters More at $5M
On a share sale, you (the individual) realize the capital gain. The LCGE applies. On an asset sale, the corporation realizes the gain internally — the LCGE is unavailable, and extracting proceeds triggers corporate tax plus personal dividend tax. The gap widens with the sale price:
Share Sale vs. Asset Sale: $5M Tech Startup (NB)
| Metric | Share sale (QSBC) | Asset sale |
|---|---|---|
| Capital gain | $4,900,000 | $4,900,000 |
| LCGE applied | $1,250,000 | $0 |
| Approximate total tax | ~$972,725 | ~$1,305,850 |
| After-tax proceeds | ~$4,027,275 | ~$3,694,150 |
| Share-sale advantage | ~$333,125 | |
The buyer often prefers an asset sale (for tax deduction purposes — they can step up the asset basis). A common negotiation: the seller accepts a slightly lower share-sale price in exchange for the LCGE benefit, while the buyer gets a lower price. The $333,125 LCGE savings creates room for both sides to win. This is where a post-sale investment strategy becomes critical.
Spousal LCGE Doubling: Shelter $2.5M Instead of $1.25M
Each individual has their own ~$1,250,000 LCGE. If both spouses hold QSBC shares personally, a couple could shelter up to $2,500,000 of the $4,900,000 gain. That drops the exposed gain from $3,650,000 to $2,400,000 — and the tax bill from ~$972,725 to approximately $639,600. An additional saving of roughly $333,125.
The catch: the spouse must hold the shares personally for at least 24 months before the sale, and all three QSBC tests must be met. A share reorganization issuing common shares to a spouse should happen the moment you start thinking about an exit — not after the term sheet arrives. For a deeper look at structuring the pre-sale ownership, see our analysis of NB business owner share-sale and estate-freeze planning.
NB Probate Fees on Post-Sale Estate
New Brunswick charges $5 per $1,000 on the full estate value — no minimum exemption, no cap. On a $5M estate of post-sale proceeds: $25,000 in probate fees. On a $3M estate (after spending and gifting): $15,000. Compare that to Alberta's flat maximum of $525 or Manitoba's $0. If you're sitting on $4M+ of liquid assets in New Brunswick, probate-minimization strategies (beneficiary designations, inter vivos trusts, joint ownership) can save $10,000–$25,000. For the full provincial comparison, see our probate fees comparison guide.
The Decision Framework: Which Structure Wins?
Quick Decision Table
| If your situation is... | The play is... | Approx. tax on $5M sale |
|---|---|---|
| Need cash at closing, no spouse shares | Lump sum, LCGE on your shares | ~$972,725 |
| Buyer agrees to installments, no spouse shares | 10-year reserve + LCGE | ~$836,398 |
| Both spouses hold QSBC shares, lump sum | Spousal LCGE doubling | ~$639,600 |
| Both spouses hold QSBC shares + reserve | Spousal doubling + 10-year reserve | ~$540,000 |
| Shares don't qualify as QSBC | No LCGE — lump sum | ~$1,305,850 |
The spread between the best case (spousal doubling + reserve: ~$540,000) and the worst case (no QSBC qualification, lump sum: ~$1,305,850) is $765,850. On the same $5M deal. That's why QSBC qualification and deal structure are not tax footnotes — they're the largest single financial decision in the transaction.
ACOA, NB Growth Fund, and BDC: Buyer-Side Financing
If your buyer is financing the acquisition, New Brunswick offers several programs that can make a deal close faster (and make an installment structure more secure for you as seller):
- Atlantic Canada Opportunities Agency (ACOA): Interest-free or low-interest loans for business acquisition and expansion in Atlantic Canada. Can backstop a buyer's installment commitment.
- NB Growth Fund / Opportunities New Brunswick: Provincial investment programs that co-invest in qualifying NB businesses, particularly in technology and innovation.
- Business Development Bank of Canada (BDC): Subordinated debt and equity financing for acquisitions. BDC is particularly active in tech-sector transactions.
These programs don't directly reduce your tax — but they reduce deal risk. A buyer backed by ACOA or BDC financing is more likely to honour a 10-year installment schedule, which is what makes the reserve strategy viable.
Frequently Asked Questions
Q:Does the LCGE fully shelter a $5M tech startup sale in New Brunswick?
A:No. The 2026 LCGE limit is approximately $1,250,000 on qualifying small business corporation (QSBC) shares. On a $5M sale with a $4.9M gain (assuming $100K adjusted cost base), the LCGE shelters $1,250,000 of the gain. The remaining $3,650,000 is taxable at 50% inclusion, producing $1,825,000 of taxable income. At New Brunswick’s top combined rate of approximately 53.30%: roughly $972,725 in capital gains tax on the exposed portion. The LCGE covers about 26% of the gain — the rest requires tax planning.
Q:What are the three QSBC tests a tech startup must pass for the LCGE?
A:Three tests under ITA s. 110.6: (1) At the time of sale, 90% or more of the corporation’s assets by fair market value must be used in an active business carried on primarily in Canada. (2) For the 24 months before the sale, more than 50% of assets must have been active-business assets. (3) The shares must have been held by you personally (not a holding company or trust) for at least 24 months. Tech startups commonly fail the 90% test because of excess cash from prior funding rounds or passive investment holdings.
Q:How does the capital gains reserve work on a tech startup sale?
A:Under ITA s. 40(1)(a)(iii), when you sell shares and receive payment over time (installments), you can defer reporting the full capital gain. For QSBC shares, the reserve extends up to 10 years. You must include at least 10% of the gain each year. The LCGE is applied first (sheltering $1,250,000), then the remaining gain is spread across the installment period. On $3,650,000 of exposed gain spread over 10 years: $365,000 of gain per year, producing $182,500 of taxable income per year at 50% inclusion — potentially dropping from the top bracket to a lower one.
Q:What is New Brunswick’s top combined marginal tax rate in 2026?
A:Approximately 53.30% (federal top rate of 33% + New Brunswick’s top provincial rate of 20.30% on income above approximately $185,064). This is among the higher combined rates in Canada, though lower than Nova Scotia (~54%) and comparable to Ontario (53.53%). On capital gains at 50% inclusion, the effective tax rate on the gain itself is approximately 26.65%.
Q:Can both co-founders use their LCGE on the same tech startup sale?
A:Yes — if both co-founders hold QSBC shares personally. Each individual has their own ~$1,250,000 LCGE. Two co-founders could shelter up to ~$2,500,000 of the capital gain. On a $5M sale with a $4.9M gain, spousal or co-founder LCGE doubling would leave only $2,400,000 of exposed gain instead of $3,650,000 — saving approximately $333,000 in additional tax. The shares must be held personally (not through a holdco) for at least 24 months, and all three QSBC tests must be met.
Q:How do NB probate fees affect post-sale estate planning?
A:New Brunswick probate fees are $5 per $1,000 on the full estate value with no threshold — no minimum exemption. On a $5M estate: approximately $25,000. If your after-tax sale proceeds ($4M+) sit in non-registered accounts and pass through your will at death, this cost applies. Naming beneficiaries on registered accounts (RRSP, TFSA) and using trusts or joint ownership for non-registered assets can reduce the probate-exposed portion. Source: Service NB Probate Court schedule.
Question: Does the LCGE fully shelter a $5M tech startup sale in New Brunswick?
Answer: No. The 2026 LCGE limit is approximately $1,250,000 on qualifying small business corporation (QSBC) shares. On a $5M sale with a $4.9M gain (assuming $100K adjusted cost base), the LCGE shelters $1,250,000 of the gain. The remaining $3,650,000 is taxable at 50% inclusion, producing $1,825,000 of taxable income. At New Brunswick’s top combined rate of approximately 53.30%: roughly $972,725 in capital gains tax on the exposed portion. The LCGE covers about 26% of the gain — the rest requires tax planning.
Question: What are the three QSBC tests a tech startup must pass for the LCGE?
Answer: Three tests under ITA s. 110.6: (1) At the time of sale, 90% or more of the corporation’s assets by fair market value must be used in an active business carried on primarily in Canada. (2) For the 24 months before the sale, more than 50% of assets must have been active-business assets. (3) The shares must have been held by you personally (not a holding company or trust) for at least 24 months. Tech startups commonly fail the 90% test because of excess cash from prior funding rounds or passive investment holdings.
Question: How does the capital gains reserve work on a tech startup sale?
Answer: Under ITA s. 40(1)(a)(iii), when you sell shares and receive payment over time (installments), you can defer reporting the full capital gain. For QSBC shares, the reserve extends up to 10 years. You must include at least 10% of the gain each year. The LCGE is applied first (sheltering $1,250,000), then the remaining gain is spread across the installment period. On $3,650,000 of exposed gain spread over 10 years: $365,000 of gain per year, producing $182,500 of taxable income per year at 50% inclusion — potentially dropping from the top bracket to a lower one.
Question: What is New Brunswick’s top combined marginal tax rate in 2026?
Answer: Approximately 53.30% (federal top rate of 33% + New Brunswick’s top provincial rate of 20.30% on income above approximately $185,064). This is among the higher combined rates in Canada, though lower than Nova Scotia (~54%) and comparable to Ontario (53.53%). On capital gains at 50% inclusion, the effective tax rate on the gain itself is approximately 26.65%.
Question: Can both co-founders use their LCGE on the same tech startup sale?
Answer: Yes — if both co-founders hold QSBC shares personally. Each individual has their own ~$1,250,000 LCGE. Two co-founders could shelter up to ~$2,500,000 of the capital gain. On a $5M sale with a $4.9M gain, spousal or co-founder LCGE doubling would leave only $2,400,000 of exposed gain instead of $3,650,000 — saving approximately $333,000 in additional tax. The shares must be held personally (not through a holdco) for at least 24 months, and all three QSBC tests must be met.
Question: How do NB probate fees affect post-sale estate planning?
Answer: New Brunswick probate fees are $5 per $1,000 on the full estate value with no threshold — no minimum exemption. On a $5M estate: approximately $25,000. If your after-tax sale proceeds ($4M+) sit in non-registered accounts and pass through your will at death, this cost applies. Naming beneficiaries on registered accounts (RRSP, TFSA) and using trusts or joint ownership for non-registered assets can reduce the probate-exposed portion. Source: Service NB Probate Court schedule.
This Is a Six-Figure Decision. Get Your Specific Numbers.
The spread between the best and worst tax outcome on a $5M tech startup sale is $765,850. The LCGE qualification, deal structure, spousal share planning, and reserve strategy all interact — and each one is a decision you make before closing, not after.
This is the kind of decision where a fee-only CFP can pay for itself in tax savings alone. Life Money's advisors offer a flat-fee 90-minute consultation that walks through your specific numbers.
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