Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
calculation of part F of the formula for a non-capital loss where taxpayer has both income and a loss from a particular type of income (i.e. rental, farming, business, professional) as well as subdivision e deductions in excess of the total amount of income from all sources
Position:
income and losses from different sources of employment, business, property, etc. should be determined separately so that the amount of income shown on form T1A is not netted by any losses from a source
Reasons:
if income from all sources is computed with reference to the net amounts shown on the T1 return and is less than the total of subdivision e deductions, then the total losses will be understated as so will the non-capital loss
January 26, 1996
OTTAWA TAXATION CENTRE Headquarters
Enquiries and Adjustments A. Humenuk
957-8953
Attention: Meera Gupta
960048
Calculation of a non-capital loss
We are replying to your memorandum of January 4, 1996 in which you ask for clarification of the manner in which a non-capital loss should be calculated.
Your question relates primarily to amount F in the formula E - F which is used to determine amount A in the formula (A + B) - (C + D + D.1 + D.2) which is used to calculate a non-capital loss under subsection 111(8) of the Act.
Where an individual has more than one source of income aggregated and reported on any of lines 130 through 143 of the return, there is the potential that the system calculation of the non-capital loss will be incorrect. The reason for this is that the calculation of a non-capital loss as determined under subsection 111(8) of the Act involves a segregation of a taxpayer's losses for the year from amounts of net income attributable to other sources in the year. If an individual has more than one source of income reported on any of lines 135 to 143 of the return, the amount shown in that keyfield will be the net amount of income from that type of income source and thus the system will be unable to identify any losses that are included in the net amount of income from that particular type of source of income.
Similarly, any loss from a particular employment source is not readily apparent from the tax return since keyfield 101 includes the gross amount of income earned from all employment sources whereas any employment-related deductions that are available under section 8 of the Act are reported separately on page 2 of the return along with other deductions used in computing net income. As a consequence of the manner in which employment income and deductions are reported on the return, deductions in computing employment income are not matched to the appropriate source of employment income where an individual has more than one source of employment income.
The ability to quantify the total amount of a taxpayer's losses from various sources separately from the sum total of income from other sources is important to the calculation of a non-capital loss because the deductions available under subdivision e of the Act are only applied to reduce the amount of income as determined under paragraph 3(c) which in turn, forms amount F of the formula set out in subsection 111(8) of the Act. The deductions described in subdivision e of the Act cannot create or increase the amount of a non-capital loss.
In summary, we confirm your understanding that a non-capital loss should be calculated in the manner shown on form T1A even though that may require an analysis of the amount that comprise the figure shown in some of the keyfields on the return.
P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content