Last updated: July 05 2011
A computer "glitchî has materialized at Canada Revenue Agency with the processing of T1 returns of deceased taxpayers. In short, assessments are being processed without taking ITA S. 111(2) into consideration regarding capital losses and capital loss carry forwards.
In years other than the year of death, capital losses may only be deducted against capital gains in the year, the prior three years, or subsequent years. In the year of death, S.111 (2) allows capital losses from the current year and capital losses carried forward from previous years to be applied to reduce any type of income. There are two methods permitted.
For Method A, the capital losses must be used in this order:
For Method B:
The assessments are currently being processed to carry-forward capital losses for use in future years of the deceased taxpayer. Tax and Financial Advisors should review their client files and notify any clients that may fall into this category to review the NOA and any changes applied prior to remitting additional tax to CRA.