26 January 2010 Internal T.I. 2010-0354701I7 - S. 111 Losses Claimed by Undischarged Bankrupt

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.

Principal Issues: Whether a taxpayer, while bankrupt, could carry forward s. 111 losses.

Position: No.

Reasons: S. 128(2)(f)(iii) prohibits a bankrupt taxpayer from carrying forward and deducting s. 111 losses when computing taxable income.

									January 26, 2010

	Calgary Tax Services Office				HEADQUARTERS
									Income Tax Rulings
	Attention: Rory Cowie	   				Directorate
	                Team Leader, Appeals Division	Lindsay Frank
(613) 948 2227

									2010-035470

Section 111 Losses Claimed by an Undischarged Bankrupt

This is in reply to an email from Karla Macdonald. At issue, is whether an individual taxpayer, while bankrupt, could claim section 111 losses in computing taxable income.

The taxpayer was adjudged bankrupt in 1991 and received an absolute discharge from bankruptcy in 2008. In 1998, 2001, and 2003, he incurred non-capital losses which could in normal circumstances be deducted pursuant to section 111 of the Income Tax Act (the "Act") in computing taxable income. He claimed such losses in returns for the 2005, 2006, and 2007 taxation years. Ms. Macdonald is of the view that, pursuant to subparagraph 128(2)(f)(iii) of the Act, such losses are not deductible. We share her view, see Abtan v. R., [2006] 1 C.T.C. 2001 (T.C.C.).

Should you have any questions or require additional information on the foregoing, please do not hesitate to contact Lindsay Frank at the telephone number provided above.

B.J. Skulski
Manager
Insolvency and Administrative Law Section
Business and Partnerships Division
Income Tax Rulings Directorate

c.c. Karla Macdonald

Appeals Division
Calgary Tax Services Office