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: Whether capital losses incurred after February 27, 1994, have to be netted against deemed capital gains for purposes of the capital gains exemption in 1994.
Position: Yes.
Reasons: Based on the provisions in the Income Tax Act.
July 6, 1999
xxxxxxxxxx
Dear XXXXXXXXXX:
I am writing in response to your letter of March 25, 1999, regarding the income tax treatment of capital gains earned by individuals after February 22, 1994. You wrote on behalf of your constituent, XXXXXXXXXX.
The income tax treatment of some capital gains realised after February 22, 1994, was changed, so that the $100,000 lifetime capital gains exemption could no longer be used to reduce income tax arising from dispositions after February 22, 1994. These amendments contained a special election provision, which allowed many individuals to use up any unused portion of their lifetime capital gains exemption on capital gains that had accrued up to February 22, 1994, on certain property held by them. Exceptions were made in the Income Tax Act to continue the exemption for dispositions of qualifying small business corporation shares and farm property.
In your letter, you correctly point out that for 1994, individuals who had elected to report their accrued capital gains as of February 22, 1994, were required to reduce them by capital losses sustained after that date. There are a number of different rules in the Act governing the calculation of the capital gains exemption for 1994. In general terms, these rules require that an individual's taxable capital gains be netted against certain capital losses for 1994, thereby affecting the amount of the capital gains exemption for that year. I would like to assure you that the calculation of the capital gains exemption for 1994 in this manner, is based on specific provisions in the Act and not on administrative rules.
I hope that the above comments are helpful.
Yours sincerely,
Herb Dhaliwal, P.C., M.P.
J. Gibbons
957-2135
June 3, 1999
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