An estate cannot claim a s. 42(1)(b) capital loss for settling an indemnity claim against the deceased

Death also results in the loss of the ability to claim a s. 42(1)(b)(ii) capital loss respecting an indemnity payment which becomes payable after death (i.e., neither the deceased nor the estate can claim it).

Neal Armstrong.  Summary of 19 January 2015 T.I. 2013-0511381E5 F under s. 42(1).