A graduated rate estate may recognize a capital loss for s. 164(6) carryback on a personal-use property of the deceased such as a principal residence

2008-0280751E5 indicated that an estate which sold the principal residence of the deceased (which was vacant in its hands) within one year of the death was able to claim a capital loss based on the amount of depreciation in value of the residence from the time of death, given that the residence did not constitute personal-use property to it, so that it could then carry back the loss under s. 164(6).

A capital loss could be generated by a graduated rate estate in other situations, for example, where the estate received other personal-use property of the deceased, such as a yacht that then depreciated in value while being kept in drydock, or where it received a large piece of real estate, only a portion of which qualified as the principal residence of the deceased, so that a capital loss could be claimed and carried back under s. 164(6) respecting the entire property.

Neal Armstrong. Summary of Balaji Katlai and Henry Korenblum, “Estate’s Loss on Former Principal Residence Carried Back,” Canadian Tax Focus, Vol. 15, No. 3, August 2025, p. 7 under s. 164(6).