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 the Minister can forgive taxes on interest income when an investor loses his original investment.
Position: No. The interest income is generally taxable under the Income Tax Act, but the investor can claim a capital loss against past or future net capital gains.
Reasons: The legislation.
July 3, 2013
XXXXXXXXXX
Dear XXXXXXXXXX:
The office of your member of Parliament, XXXXXXXXXX, sent me a copy of your correspondence, which I received on May 7, 2013, about forgiving taxes on interest income when an investor loses the original investment.
You want to see the XXXXXXXXXX Security Commission take a bigger role in this matter. Because this is a provincial issue, I suggest you send your comments to the Government of XXXXXXXXXX.
As you know, the interest amounts you mention are generally taxable under the Income Tax Act, but the investor can claim a capital loss against past or future net capital gains. You believe you will not receive any tax benefit for the recognition of the capital loss because taxpayers can only deduct this loss against net capital gains. You also believe that the interest income should not be taxed under these circumstances and ask for an exemption from paying the tax.
An investor must pay tax on interest income related to a financial product even if the investor loses his or her investment. For the interest income to be exempt from tax in the circumstances you describe, a change to the Act is necessary. The Canada Revenue Agency administers and enforces the Act as passed by Parliament. Changes to tax policy and to the Act are the responsibility of the Department of Finance Canada. If you want to discuss this issue more, you can write to the Tax Policy Branch of Finance Canada, 17th Floor, East Tower, L'Esplanade Laurier, 140 O'Connor Street, Ottawa ON K1A 0G5.
I trust the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C., M.P.
c.c.: XXXXXXXXXX
Ananthy Mahendran
(905) 721-5204
2013-048973
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