Capital Losses Not Worthless
This loss will be used to offset the capital gains of the year, $40,000 in this case. Marissa’s net capital gain, therefore is $40,000 less $625 = $39,375 and the taxable gain is 50% of this or $19,687.50.
Capital Loss Carry Back. Marissa’s brother, Mark, was not so lucky this year. He lost $30,000 in the stock market. He had no other capital gains this year, but last year he had a great year; he made $40,000 in the stock market. He can now reach back and recover some of the taxes he paid last year with a loss carry back. He would use Form T1A Request for Loss Carry Back to do so.
In Mark’s case, his other income of the year was $65,000 from employment. He paid $13,365 in taxes on his total income. The loss carry back created a refund of $4,672 and so was very worthwhile. Mark contributed that extra money to his TFSA.
Classification of Property. There are special rules for the classification of certain capital properties that are important in understanding how to claim losses. A very special tax break, the Capital Gains Deduction is also available on the disposition of certain investments.