Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services.

Legitimate loss is a real thing

Tax Tips & Pits with Trail Times columnist Ron Clarke

Sounds like an oxymoron.

Well, when it comes to taxes, it’s an accurate term. Canada Revenue Agency (CRA) defines several types of losses available to offset income. Here is a simple presentation of several common ones.

A loss from the disposal of capital assets such as stocks and recreational property is called a “capital loss”. This type of loss is used to offset any capital gains in the current year. If a net capital loss remains it can be carried back 3 years or forward indefinitely to offset capital gains in those other years.

Because CRA generously only requires 50 per cent of a capital gain to be reported as income, then CRA only allows 50% of a capital loss to be used.

An interesting fact, at least to collectors of prized items, is that capital losses can also occur on “personal use property” – sports cards, coins, artwork, jewellery – if a taxpayer makes a declaration with CRA identifying the valuables along with their current market value. However if there ever is a capital gain on your collection of, say, pennies – remember those coins – a capital gain will have to be reported.

Any capital loss existing in the year of death can be used to offset any type of income, not just capital gains.

An “allowable business investment loss” (ABIL) occurs with non-recoverable debt or loss on shares of qualified small business corporations that you loaned money to or invested in, and now all or at least a portion of it has no value.

An ABIL can be used to offset any form of income and can be carried back 3 years or forward 10. If carried forward and not used within 10 years, the ABIL is then treated as a capital loss and can be carried forward indefinitely.

For owners of proprietorships, rental properties and farms, if business doesn’t treat you well and you suffer a business loss at the end of the year, CRA considers this a “non-capital loss”. In calculating the business loss, any wages taken by the owner cannot be included as an expense against the revenue.

A non-capital loss can be carried back three years to off-set business profits, or carried forward 20 years to net against future business profits.

A final note, if after the application of a current year loss to any applicable current year income a net loss remains, it is usually best to apply that loss to the oldest available year first and move forward in time from there.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.

Just Posted

Dynamiters win Game 3, Nitehawks on brink of elimination

McDowell scores twice to lift Kimberley Dynamiters to a 3-0 series lead against the B.V. Nitehawks,

Vipers win pivotal game 5 to take 3-2 series lead

Vipers beat the Trail Smoke Eaters by a score of 5-2 and will look to end the series Saturday night in Trail at 7 p.m. at the Trail Memorial Centre. Contributed: Vernon Vipers Staff

Last call for Trail-Warfield Citizen of the Year entries

The deadline is Friday, April 12 at noon

Unofficially, Trail Smoke Eaters deserved better

Sports ‘n’ Things with Dave Thompson

Trail senior has her voice heard by Interior Health

At the end of the day, Rina is hoping that she was heard and that things will change

Sparks fly as SUV speeds down wrong side of Highway 1 trying to flee RCMP

Captured on video, the vehicle headed westbound against oncoming traffic before crashing

Calgary captain has 3 points as Flames torch Canucks 3-1

Giordano leads way as Alberta side cracks 100-point plateau

1,300 cruise ship passengers rescued by helicopter amid storm off Norway’s coast

Rescue teams with helicopters and boats were sent to evacuate the cruise ship under extremely difficult circumstances

B.C. university to offer first graduate program on mindfulness in Canada

University of the Fraser Valley says the mostly-online program focuses on self-care and well being

Province announces $18.6 million for B.C. Search and Rescue

The funding, spread over three years, to pay for operations, equipment, and training

Late-season wave of the flu makes its round in B.C.

BC Centre for Disease Control reported 50 per cent jump in flu cases in first weeks of March

Tofino’s housing crisis causing some to seek shelter at the local hospital

Tofino’s housing crisis is pushing the town’s ‘hidden homeless’ population into the forefront.

Sentencing judge in Broncos crash calls for carnage on highways to end

Judge Inez Cardinal sentenced Jaskirat Singh Sidhu to eight years

2 fires in Victoria caused by cigarettes prompts warning from deputy fire chief

Two separate fires caused by cigarette butts were avoidable

Most Read