--- title: "Capital Gains Reserve Canada: Spread the Tax Over 5 Years" url: https://www.everstonecpa.com/blog/capital-gains-reserve-canada description: "How the capital gains reserve on Form T2017 spreads the tax on a sale paid in instalments over up to five years, with the limits and an example. See how." type: guide updated: 2026-10-06 summary: "A capital gains reserve lets a seller defer part of a capital gain where some of the sale proceeds are not receivable until a later year. The gain is still calculated in full at the time of sale; the reserve simply postpones the portion matching the money not yet due." faq_count: 6 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Blog](https://www.everstonecpa.com/blog) The Capital Gains Reserve in Canada Tax planning # The capital gains reserve: *spreading a gain when the money arrives over years* By EverStone CPA · Updated September 2026 · 7 min read **Quick answer:** A capital gains reserve lets a seller defer part of a capital gain where some of the sale proceeds are not receivable until a later year. The gain is still calculated in full at the time of sale; the reserve simply postpones the portion matching the money not yet due. **Sold something and paid over time?** We claim the capital gains reserve across the right years and file each return, at a fee quoted in writing. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) “Not receivable” — not merely “not yet collected”. **Rather have a CPA handle this?** A CPA at EverStone replies with a straight answer and a fixed fee for your situation. [Get My Fixed Quote →](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) ## Key takeaways - The reserve applies to proceeds **not yet receivable**, not merely to proceeds not yet collected. - Most reserves can be claimed for a maximum of four years, bringing the whole gain into income over five. - A nine-year reserve, spreading the gain over ten years, applies to certain family transfers of farm or fishing property and qualified small business corporation shares. - Form T2017 is required in every year a reserve is claimed or brought back in. - No reserve is available where the property was sold to a corporation the seller controls. ## The problem the reserve solves A sale is complete for tax at closing, not when paid. Sell on a vendor-take-back note over five years and the whole gain is realized in year one, against cash mostly unreceived. The capital gains reserve spares you selling other assets to pay the tax. Selling a rental adds CCA recapture; see [tax on selling a rental property](https://www.everstonecpa.com/blog/selling-a-rental-property-canada-tax). It defers tax; it doesn’t reduce it. Compute the gain normally in the year of disposition: proceeds, less adjusted cost base, less selling costs. Deduct a reserve and report the rest. Next year the reserve is added back, and a new one claimed if amounts are still outstanding. That add-back is how the capital gains reserve Canada allows spreads one gain across the years the money arrives. **Selling with payments spread over several years?** We calculate the reserve each year and report it on the right return, personal or corporate, at a fee quoted in writing first. See [our tax services](https://www.everstonecpa.com/tax-services), or [get a quote](https://www.everstonecpa.com/book-online?service=personal#enquiry-form). [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) ## “Not receivable” is the operative test The reserve is based on proceeds not yet *due*, not proceeds not yet *paid*, and that decides most cases. A buyer who owes the full price at closing but hasn’t paid gives you a collection problem, not a reserve. A buyer whose obligation to pay part arises only in year three gives you one. So the payment schedule in the agreement does tax work and should be drafted deliberately, not just negotiated commercially. Selling with payments spread over years? The payment schedule in the agreement determines the reserve you can claim. It is far cheaper to get that right before signing than after. [Send an Enquiry →](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) [Tax planning](https://www.everstonecpa.com/tax-planning-services-canada) ## How long the reserve can run There is a ceiling. Most reserves can run at most four years, so the whole gain is reported within five years including the year of sale. A minimum fraction is reported each year however slowly the money arrives; a ten-year payment schedule does not buy a ten-year deferral. A nine-year reserve, spreading the gain over ten years, applies to transfers to your child of family farm or fishing property or qualified small business corporation shares. It also covers qualifying business transfers and certain intergenerational transfers of those assets to a corporation controlled by your children. “Child” includes grandchildren, a child’s spouse, and someone wholly dependent on you and in your custody before age 19. Every year a reserve is claimed, Form T2017, Summary of Reserves on Dispositions of Capital Property, must be completed. The form itself sets out the maximum deductible amount and how many years the reserve may run. So each capital gain reserve you claim needs that form completed for every year it runs. ## Who cannot claim one Three exclusions catch people out. No reserve for a year if you were non-resident at its end or at any time in the next year, or tax-exempt at those times. Most important for owner-managers: none if you sold the property **to a corporation you control in any way**. That blocks the reserve on the deal owners most often consider: selling personal property to their own company. There the usual tool is a [section 85 rollover](https://www.everstonecpa.com/blog/section-85-rollover-explained), which defers the gain through elected proceeds. ## Where the reserve fits in a business sale On a share sale of an operating company, the reserve interacts with the [lifetime capital gains exemption](https://www.everstonecpa.com/blog/lifetime-capital-gains-exemption-canada-small-business). If the exemption covers the gain, a reserve only adds complexity. Otherwise, spreading the excess can avoid the top bracket and soften income-tested amounts such as, near retirement, the [OAS recovery tax](https://www.everstonecpa.com/blog/oas-clawback-planning-canada). It complements succession tools. An [estate freeze](https://www.everstonecpa.com/blog/estate-freeze-canada-small-business) caps future growth in the owner’s hands; a reserve times a gain already triggered. Family transitions often need both, and the ten-year reserve exists because family transfers are rarely paid at once. ## The risk worth naming A reserve bets the money will arrive. If the buyer defaults after year two, you have reported part of the gain and hold a bad debt. Separate rules cover that, but nothing reverses automatically. Security on the receivable matters as much as the tax analysis. Sources - [Canada Revenue Agency — T4037, Capital Gains (claiming a reserve)](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html) - [Canada Revenue Agency — Line 12700, Taxable capital gains](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains.html) This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please [speak with a CPA](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) before acting on anything here. About this article **EverStone CPA** Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. [About the firm →](https://www.everstonecpa.com/about) · [Send an enquiry →](https://www.everstonecpa.com/book-online?service=personal#enquiry-form) ### Keep reading [The lifetime capital gains exemption →](https://www.everstonecpa.com/blog/lifetime-capital-gains-exemption-canada-small-business) [Estate freezes →](https://www.everstonecpa.com/blog/estate-freeze-canada-small-business) [Section 85 rollovers →](https://www.everstonecpa.com/blog/section-85-rollover-explained) [Capital gains inclusion rate: still one-half →](https://www.everstonecpa.com/tax-update/capital-gains-inclusion-rate)[Investment Income and Capital Gains on a Canadian Return →](https://www.everstonecpa.com/investment-income-and-capital-gains)[Foreign exchange gains and losses: receivables, payables and the capital-versus-income line →](https://www.everstonecpa.com/blog/foreign-exchange-gains-losses-business-canada) FAQ ## Frequently asked questions about the capital Gains Reserve in Canada **What is a capital gains reserve?** A deduction deferring part of a capital gain when some proceeds aren’t receivable until later. The gain is computed in full in the year of sale; the reserve postpones the portion matching money not yet due. **How many years can I spread a capital gain over?** Generally four years, so the gain is reported over five. A nine-year reserve, over ten years, covers certain transfers to a child of family farm or fishing property and qualified small business corporation shares. **Does a reserve apply if the buyer just has not paid me?** No. The test is whether proceeds were receivable, not collected. If the full price was due at closing and the buyer is late, there is no reserve. **Can I claim a reserve when I sell property to my own corporation?** No, not if you sold to a corporation you control in any way. For transfers into your own company, a section 85 rollover is generally the tool. **What form do I need?** Form T2017, Summary of Reserves on Dispositions of Capital Property, for every year you claim a reserve. It sets the year’s maximum deduction and how long the reserve can run. **What happens if the buyer defaults partway through?** You have already reported part of the gain, and the unpaid amount becomes a debt; nothing reverses automatically. Separate bad-debt rules apply, so secure the receivable. ## Sale proceeds arriving over several years? Email us the sale terms and the payment schedule. A CPA replies by email within one business day with the reserve available and a fixed fee. [Get My Fixed Quote](https://www.everstonecpa.com/book-online?service=personal#enquiry-form)[Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) ## Have a question about this? Ask free through [the quick-question form](https://www.everstonecpa.com/quick-question); a CPA replies within one business day. An **Advice Call** is a paid 45-minute CPA session: $225 plus GST, booked by email with a secure payment link, credited to your first invoice if you become a client within 60 days. 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