Net capital loss - losses (allowable) from this or previous years

What’s in this article?

What is this?

A capital loss occurs when you sell or are considered to have sold a capital property for less than what you paid for it (adjusted cost base) plus any outlays and expenses involved to dispose of it. The following are capital property that can create a capital loss:

  • Qualified small business corporation shares
  • Qualified farm property and qualified fishing property
  • Publicly traded shares, mutual fund units, deferral of eligible small business corporation shares and other shares
  • Real estate, depreciable property and other properties
  • Bonds, debentures, promissory notes, and other similar properties
  • Other mortgage foreclosures and conditional sales repossessions
  • Personal-use property
  • Listed personal property (LPP)                                           

If you have an allowable capital loss in a year it has to be applied against your taxable capital gain for that year. If a loss still is available, you now have a net capital loss. You can take the net capital loss and apply it against a taxable capital gain in any of the preceding three years, or you can carry it forward to be used in future years.

You can claim a deduction for net capital losses of prior years to reduce any capital gains (Line 127 of your federal tax return) you have this year (line 253 of your federal tax return). To carryback a loss to any of the preceding three years, complete form T1A: Request for Loss Carryback.

Residents of Québec can claim net capital loss deduction on form TP-729-V: Carry-forward of Net Capital Losses and complete Schedule N if you are deducting net capital losses from other years.

 

Am I eligible?

If you sold capital property during the year for less than what you paid for it plus any outlays and expenses which you may have had to sell it, you have a capital loss. If your allowable capital loss is greater than your taxable capital gains, the difference is net capital loss. You may be able to claim a deduction for net capital losses of prior years or carry forward the net capital loss incurred in the current year to a future year.

Canada Revenue Agency (CRA) says …

To use net capital losses of prior years to reduce current year taxable capital gains, claim a deduction on line 253 of your income tax and benefit return. To carry a current year net capital loss back to 2012, 2013, or 2014, complete Form T1A, Request for Loss Carryback, and include it with your 2015 income tax and benefit return. Do not file amended returns for any of the years to which you want to apply a portion of the loss.

The amount that you can claim depends on when you incurred the loss. This is because the inclusion rates used to determine the taxable capital gains and allowable capital losses have changed over the years.

 

Revenu Québec says ….

If you are reporting a taxable capital gain on line 139 you can deduct the net capital losses you sustained before 2015 on the disposition of property other than personal-use property or precious property, provided you did not deduct these losses in a previous year. To claim the deduction, complete form TP-729-V Carry-Forward of Net Capital Losses and enclose it with your return. If you are deducing net capital losses from other years, see point 9 in the instructions for line 276 and complete Schedule N.

Form TP-729-V must be completed by any individual (including a trust) that wishes to carry forward to a given taxation year (called the “carry-forward year”)

  • a net capital loss sustained in a previous year;
  • the unused portion of a business investment loss, provided that portion has become a net capital loss and is being carried over as such for the first time.

As a rule, a net capital loss can only be used to reduce the net taxable capital gain for the carry-forward year. However, you may use losses sustained before May 23, 1985, to reduce income from other sources, to a maximum of $1,000.

Notes: In this form, any balance that may be carried forward is determined using the inclusion rate of 1/2, that is, the rate applicable to the carryforward year.

Since losses must be carried forward in the order in which they were sustained, you must carry forward the least recent loss first.

 

Where do I claim this?

Follow these steps in H&R Block’s tax software to file your 2015 taxes:

  1. Click the PREPARE tab.
  2. Click the YOUR YEAR IN REVIEW icon. You will find yourself here:
  3. Click the checkbox labelled I had investments.
  4. Scroll to the bottom of the page and click Continue.
  5. Click the RRSPS AND INVESTMENTS icon. You will find yourself here:
  6. Under the INVESTMENT INCOME heading, click the checkbox labelled Net capital losses.
  7. Scroll to the bottom of the page and click Continue.

When you arrive at the Net capital losses page, enter your information into the tax software.

 

Where can I learn more?