Return
MISS CLAIMING A CAPITAL LOSS LAST YEAR?
By Jim Cottreau FRPA
Tax laws in Canada allow for the deduction of capital losses against capital gains from such investments as stocks, mutual funds, bonds etc. If the taxpayer has no gains in the year a loss is incurred, the loss can be carried back three years against prior reported capital gains. Any resultant capital losses can be carried forward indefinitely until they are used.
From a practical point of view it makes sense to report losses in the year they occur, even if they are not used or carried back three years. The simple reason is ease in record keeping making sure the transactions are not lost over the passage of time.
However, what happens if you forget to report a loss transaction; is it lost? Canada Revenue Agency did think so, however the courts disagreed. The tax court judge stated in March 2004 that the Income Tax Act imposes no such restriction on reporting periods. The Act permits a taxpayer to carry various types of losses forward or back. The Act says nothing about requiring the losses to have been reported on a tax return.
The findings in this case will benefit anyone who may have sold a stock at a loss, in the past, and forgot to report the transaction. Claim the loss today and take advantage of your current situation.
Jim Cottreau FRPA is a Senior Partner in Atlantic Canada Taxman, who devotes much of his time to small business and tax planning.
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