Tax deductions for capital loss beyond the grave

If you report losses against other sources of income on the final income tax return, you do so by reporting them on line 253 (net capital losses of other years). If you are deducting losses from the previous year’s income, you must file a T1 adjustment request (Form T1-ADJ) or write a letter to the CRA to make the request.

Having said that, it looks like you’ve already filed your husband, Yvonne’s last tax return. If there were losses that you did not claim and could have claimed, you must file an adjustment.

You mentioned that you taxed part of his registered retirement income fund (RRIF) in his last tax return. A RRIF is fully taxable on the deceased’s final income tax return, with a potential offsetting deduction if the RRIF is transferred to a spouse. I suspect you have claimed an offsetting deduction to fully offset this income inclusion. You may not need to reduce the deduction and tax some of her RRIF income on her last tax return if you can deduct capital losses from her income for the previous year.

Either way, I would talk to the accountant who filed the tax return and ask for his help in producing a T1 adjustment. Most accountants have limited experience in filing tax returns for deceased taxpayers, as few of their clients die in any given year.

In this world, nothing is certain but death and taxes. It seems there was a bit of uncertainty in filing your husband, Yvonne’s last tax return, but you can still make the most of his capital loss carryforwards.

Ask a planner: leave your question to Jason Heath »

Jason Heath is a Fee and Advisory Only Chartered Financial Planner (CFP) with Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products.


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