Income and Tax Consequences of Selling Ownership Stakes: Evidence from Major Shareholders of Private Firms in Canada

Terry Moon and Linda Wu

No 26175, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: This paper assesses the income and tax consequences of selling ownership stakes in private companies using linked tax records of business owners in Canada. Comparing major shareholders who sell their entire stakes with matched counterparts who sell at a later time, we find large reductions in their overall income and taxes after selling their company, except for an initial spike in capital gains. Furthermore, they reduce their labor supply and wage income on average. We do not find evidence of serial entrepreneurship across ages or sectors, implying that business owners enjoy a "quiet life" after selling instead of starting new firms or remaining active in the labor market.

Keywords: Business ownership; Firm sales; Capital gains taxation; Entrepreneurship; Labor supply (search for similar items in EconPapers)
JEL-codes: G34 H24 J22 L26 (search for similar items in EconPapers)
Date: 2026-06
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:26175

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