CRA will accept amended beneficiary returns to reflect their transfer of previously-allocated capital gains back to a trust making a s. 104(13.2) designation to absorb a capital loss carryback

A year ago, CRA indicated that a trust can carry back an allowable capital loss realized in a subsequent year and file a late s. 104(13.2) designation to include in the income of the trust a taxable capital gain realized for that previous year that previously had been allocated out to the beneficiaries. In a follow-up response, CRA confirmed that it will reassess the beneficiaries’ returns for the previous year to remove that gain provided that their returns for that year are not statute-barred. Turning to the nitty gritty, CRA indicated that:

  • the T3A loss carryback request, and the T3 adjustment request for the previous year, should be filed together so that they can be processed concurrently;
  • the trust should issue amended T3s; and
  • the beneficiaries would need to file T1 adjustment requests.

Neal Armstrong. Summary of 10 June 2016 STEP Roundtable, Q.5 under s. 104(13.2).