7 June 1994 Internal T.I. 9413626 - CAPITAL GAINS DEDUCTION - TRUSTS

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

			June 7, 1994

	T1 Supplementary Guides	Rulings Directorate
	  Division	L. Holloway
	Gina Balice	(613) 957-8953
	A/Chief
			941362

Form T657A, Calculation of Capital Gains Deduction-Other Capital
Property; Your files HDM-1411-2-T4037 & HDM-1411-2-T657A

This is in reply to your memorandum dated May 20, 1994, requesting clarification of subsection 104(21.2) of the Income Tax Act S.C. 1970-71-72, c.63 as amended consolidated to June 10, 1993, (the "Act") as it applies to subsection 110.6(1) of the Act and the definitions of "annual gains limit" and "cumulative gains limit". While this memorandum was originally sent to Mr. J. Oulton, of the Technical Publications Division, this matter was forwarded, by that division, to our Directorate for reply.

It is your understanding that for purposes of calculating an individual's capital gains exemption, one must consider the amount designated by a trust to the individual under subsection 104(21.2) of the Act. Any gains not so designated by the trust would not be included in the calculation of the individual's "annual gains limit" and "cumulative gains limit" in section 110.6 of the Act.

We agree with your interpretation that only those gains the trust designates as eligible under subsection 104(21.2) of the Act would be used in the calculation of the "annual gains limit" and the "cumulative gains limit" of the individual. The definitions of "annual gains limit" and "cumulative gains limit" were amended in 1993 to provide that for 1988 and subsequent years, both these limits were to be reduced by net capital losses of one year carried over and deducted in another year only to the extent that such losses were deducted against gains eligible for inclusion in the "annual" and the "cumulative" gains limits of the individual. Accordingly, net capital losses of the individual claimed in the year would not be reduced by "non-eligible gains" of a trust for purposes of section 110.6 of the Act.

for Director
Manufacturing Industries,
Partnerships and Trusts Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch