31 May 1995 External T.I. 9504105 - CAPITAL LOSSES

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.

Principal Issues:

1. Whether the amount of the net capital loss of a prior year used in a taxation year is increased pursuant to 111(1.1)(a) of the Act?

2. Whether 111(1.1)(a) applies to individual and corporation?

Position TAKEN:

1 and 2. Yes

Reasons FOR POSITION TAKEN:

Provisions of 111(1.1)(a).

			5-950410
XXXXXXXXXX		R. Gagnon

Attention: XXXXXXXXXX

May 31, 1995

Dear Sirs:

Re: Paragraph 111(1.1)(a) of the Act (the "Act")

This is in reply to your letter of February 6, 1995 wherein you requested a technical interpretation concerning paragraph 111(1.1)(a) of the Act.

It is our view that under paragraph 111(1.1)(a) of the Act, the net capital loss claimed by a taxpayer that may be deducted against taxable capital gain in a particular year will be increased for the purposes of the deduction under paragraph 111(1)(b) of the Act where the loss is carried forward from a loss year in which the inclusion rate was lower than the inclusion rate for the particular year in which the loss is to be claimed. The adjustment is achieved by multiplying the net capital loss claimed by the ratio of the taxpayer's inclusion rate for the particular year in which the loss is to be claimed over his inclusion rate for the loss year.

Paragraph 111(1.1)(a) of the Act applies to corporations and individuals.

The foregoing opinions are not rulings and, in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate