I had a visitor write me a question yesterday who did not leave an e-mail address to respond. Since the question was non-specific, I’ve chosen to publish the question verbatim and provide my answer here.
Question…
I have just received a notice of assessment from the CRA and it says that I have unused net capital losses from other year. I haven’t got the records for these, how can I find them and when I do how do I apply them?
Answer…
When you sell an investment or property during a given tax year you may incur either a capital gain or capital loss. In a very general sense the capital gain or loss is calculated as the difference between what you received from selling the investment less what you originally paid (actually the calculation can be more complicated but essentially this is how it works). In the tax year you can use any capital losses to offset any capital gains only so far as the losses offset the gains to zero for the tax year.
Any remaining net capital losses can be carried back three years and forward indefinitely and applied to any capital gains. If you have had capital gains in the prior three years and would like to use your net capital losses, you can file an amended return (call the CRA for assistance). To apply your net capital losses going forward, you simply claim them on your tax return.
One further note: The only time you can apply you net capital losses to other income is on your final “terminal” tax return, or in other words after you die.
To find out more about the net capital losses, I would suggest looking at your past years Notices of Assessment to determine the tax year you original claimed them and take a look at the tax return for more information. You might also try contacting the Canada Revenue Agency and asking them if they can tell you the tax year they were claimed and any other information they have on file to help with your search.
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{ 1 comment… read it below or add one }
My spouse passed away on 8Nov 2008. He had accrued up to $25000
capital losses over the last 10 yrs.This tax yr , i.e 2008 there was no capital gain. I was told that in his final return, I could apply his INCOME against his capital losses.
His income in 2008 was only $5220.
After putting his fiqures in Quiktax, his refund came to $345.
His net income came to $4770.
Does it make sense that I apply $4770 to reduce his capital losses..what line does that go on, in the tax program, or am I not reading this correctly? Please help as this is confusing me?
Thanks