Net Capital Loss Carry Back in Year of Death?

If the T3 has capital losses and cant be used on the T3 return, can you carry losses those back to the 'T1' and apply them???  Thanks

Answer

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As per normal, capital losses in the year of death can still be carried back to offset capital gains in any of the 3 preceding years.  Since the carryforward of a net capital loss is not available to a deceased taxpayer, a net capital loss incurred in the year of death may instead be applied against income from any other source in the year of death and/or in the immediately preceding year.

The amount that may be deducted in this way is calculated as follows:
Net capital loss ... less;
   - any portion applied against capital gains in the preceding 3 years ... less;
         - total capital gains deductions claimed to date by, or on behalf of the deceased.

The net capital loss does not have to used first to reduce any capital gains incurred in the preceding 3 years. Some or all of it can be applied against other income in the year of death or in the immediately preceding year if it would be more beneficial. Any deduction against other income in the year of death is claimed on line 127 of the final return. The deduction against other income in the prior year is claimed on a T1A.  Although, in either case, the deduction is claimed on line 127, it does not reduce income for any other purpose other than calculating tax payable.

Example ... John Doe died in 2011. A net capital loss of $12,000.00 was reported on the final return. The legal representative wishes to apply part of this loss against a taxable capital gain of $3,000.00 that was reported on his 2009 return. This is done in the normal manner using a T1A. The remaing unnaplied net capital loss may be deducted against other income in 2011 or in 2010.

Hope this helps ...
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