*** Transcriber's note: Please set your voice synthesizer to read most punctuation. When you encounter the caret sign at the end of a line, please enter the applicable information, if necessary. Tables are indicated by three backslashes at the beginning and at the end. *** Canada Revenue Agency T657 E (11) (Page 1 of 4) CALCULATION OF CAPITAL GAINS DEDUCTION FOR 2011 Use this form if you disposed of qualified farm property or qualified small business corporation shares in 2011 or a previous year, or disposed of qualified fishing property after May 1, 2006. For the definitions of qualified farm property, qualified fishing property and qualified small business corporation shares, see the "Definitions" section in Guide T4037, Capital Gains. Note You have to be a resident of Canada throughout 2011 to be eligible to claim the capital gains deduction. For the purpose of this deduction, we also consider you to be a resident throughout 2011 if you were a resident of Canada for part of 2011 and throughout 2010 or 2012. Deferred capital gains from the disposition of qualified small business corporation shares do not qualify for this deduction. If you have investment income or investment expenses in 2011, complete Form T936, Calculation of Cumulative Net Investment Loss (CNIL) to December 31, 2011, before you complete this form. Form T936 lists what we consider to be investment income and expenses. If you are reporting a reserve claimed on your 2010 return or claiming a reserve for 2011, you also have to complete Form T2017, Summary of Reserves on Dispositions of Capital Property. To get these forms go to www.cra.gc.ca/forms or call 1-800-959-2221. What is the capital gains deduction limit? If you disposed of qualified farm property or qualified small business corporation shares, or disposed of qualified fishing property after May 1, 2006, you may be eligible for the lifetime capital gains exemption (LCGE). Because you only include one half of a capital gain in your income, your cumulative capital gains deduction is one half the LCGE. The total of your capital gains deductions on dispositions from 1985 to March 18, 2007, of qualifying capital property could not be more than your cumulative deduction of $250,000. However, the capital gains deduction limit on gains arising from the dispositions of qualifying capital property after March 18, 2007, increased by $125,000 to $375,000 (one-half of an increased exemption of $750,000). For more information, see the section called "Claiming a capital gains deduction" in Guide T4037, Capital Gains. Qualified farm property, qualified fishing property, and qualified small business corporation shares When you dispose of qualified farm property, qualified fishing property, or qualified small business corporation shares and have a capital gain, you can claim a capital gains deduction in 2011 that is equal to one of the following amounts, whichever is lowest: - your annual gains limit for 2011; - your cumulative gains limit for 2011; - your net taxable capital gains reported in 2011 from dispositions of qualified farm property, qualified small business corporation shares, and qualified fishing property disposed of after May 1, 2006; and - your maximum capital gains deduction available for 2011. There is an election available to you if you own shares of a qualifying small business corporation that stops being a small business corporation because: - a class of its shares is listed on a designated stock exchange; or - after 1999, another class of its shares is listed on a designated stock exchange. This election will allow you to report a taxable capital gain on your return and claim the $375,000 capital gains deduction, even though you did not actually sell your shares. The deduction applies to any gain you have on these shares to the date the shares are listed. To make this election, complete Form T2101, Election for Gains on Shares of a Corporation Becoming Public. To get this form go to www.cra.gc.ca/forms or call 1-800-959-2221. T657 E (11) (Page 2 of 4) Part 1 – Calculating your annual gains limit for 2011 Line 1: Total net capital gains (or losses): total of lines 107, 110, and 124 of Schedule 3 plus lines 6683 and 6690 of Form T2017 (if the amount is a loss, show it in brackets) ^ Line 2: Total taxable capital gains (or losses): Amount from line 1 ^ Multiplied by one-half = ^ Line 3: Farming/fishing incomes eligible for the capital gains deduction (line 173 on Schedule 3) ^ Line 4: Eligible taxable capital gains or losses (line 2 plus line 3; if negative, enter "0") = ^ Line 5: Total taxable capital gains or net capital losses from line 199 of Schedule 3 (if the amount is a loss, show it in brackets)^ Line 6: Amount from line 176 on Schedule 3 (if negative, enter "0") ^ Multiplied by one-half = ^ Line 7: Line 5 minus line 6 = ^ Line 8: Enter the amount from line 3 above ^ Line 9: Line 7 plus line 8 (if the amount is a loss, enter "0") = ^ Line 10: 2011 eligible taxable capital gains (enter the amount from line 4 or 9, whichever is less; if line 10 is zero, you cannot claim a capital gains deduction for 2011) ^ Line a: Net capital losses of other years deducted in 2011 (line 253 of your 2011 return). The amount cannot exceed the amount from line 7 above. ^ Line b: Net capital losses of other years applied against net non-eligible taxable capital gains in 2011 (line 7 in Part 1 of Form T936 for 2011) ^ Line 11: Net capital losses of other years (line a minus line b; if negative, enter "0") = ^ Line 12: Allowable business investment losses (line 217 of your 2011 return) ^ Line 13: Line 11 plus line 12 = ^ Line 14: Annual gains limit for 2011 (line 10 minus line 13; if negative, enter "0") = ^ If line 14 is zero, do not complete the rest of this form, because you cannot claim a capital gains deduction for 2011. Part 2 – Calculating your cumulative gains limit for 2011 Line 15: Total taxable capital gains reported after 1984 and before 1992 (line 127 of your returns for these years). Do not include reserves reported on property disposed of before 1985 ^ Line 16: 1992 and 1993 eligible taxable capital gains (line 3 in Part 1 of Form T657 or T657A for 1992 and 1993) ^ Line 17: 1994 eligible taxable capital gains (line 5 in Part 1 of Form T657 or T657A for 1994) ^ Line 18: 1995 eligible taxable capital gains (line 7 in Part 1 of Form T657 or line 3 of Form T657A for 1995) ^ Line 19: 1996 to 1999 eligible taxable capital gains (line 8 in Part 1 of Form T657 for those years) ^ Line 20: 2000 eligible taxable capital gains (line 7 in Part 1 of Form T657 for 2000) ^ Line 21: 2001 eligible taxable capital gains (line 8 in Part 1 of Form T657 for 2001) ^ Line 22: 2002 to 2011 eligible taxable capital gains (line 10 in Part 1 of Form T657 for those years) ^ Line 23: Cumulative eligible taxable capital gains (total of lines 15 to 22) = ^ Line 24: Allowable capital losses claimed in 1985 (amount shown in brackets on line 127 of your 1985 return; maximum of $2,000) ^ Line 25: Allowable business investment losses claimed after 1984 and before 2011 (line 217 on your 1985 to 2010 returns) ^ Line 26: Net capital losses of other years claimed after 1984 and before 2011 (enter the total of amounts in column G of Chart 1 on page 4) ^ Line 27: Total losses used to calculate your annual gains limit for 2011 (from line 13 of Part 1 above) ^ Line 28: Cumulative net investment loss to December 31, 2011 (line C in Part 3 of Form T936 for 2011) ^ Line 29: Total capital gains deductions claimed after 1984 and before 2011 (line 254 on your 1985 to 2010 returns) ^ Line 30: Total of lines 24 to 29 = ^ Line 31: Cumulative gains limit for 2011 (line 23 minus line 30; if negative, enter "0") = ^ If line 31 is zero, do not complete the rest of this form, because you cannot claim a capital gains deduction for 2011. T657 E (11) (Page 3 of 4) Part 3a – Calculating your capital gains deduction on qualified farm property, qualified fishing property, and qualified small business corporation shares (Step 1) Complete this part if: - you disposed of qualified farm property, qualified fishing property, or qualified small business corporation shares in 2011; or - you are reporting a reserve in 2011 from the disposition of qualified farm property, qualified fishing property and/or qualified small business corporation shares Line 32: Maximum capital gains deduction for qualified farm property, qualified fishing property, and/or qualified small business corporation shares $375,000.00 Line 33: Capital gains deductions from previous years (line k of Chart 2 on page 4) ^ Line 34: Capital gains deduction available for dispositions of qualified farm property, qualified fishing property, and qualified small business corporation shares (line 32 minus line 33; if negative, you do not qualify for a capital gains deduction in 2011) = ^ Line 35: Taxable capital gains from dispositions after March 18, 2007, of qualified farm property, qualified fishing property and/or qualified small business corporation shares included in your 2011 income: ^ Line 107 of Schedule 3 ^ Line 110 of Schedule 3 ^ Line 124 of Schedule 3 ^ Line B of Form T2017 ^ Line D of Form T2017 ^ Line 35: Total (If negative, enter "0") = ^ Multiplied by on-half = ^ Line 36: Farming/fishing income eligible for the capital gains deduction (line 173 of Schedule 3) ^ Line 37: Total taxable capital gains from the disposition of qualified farm property, qualified fishing property, and qualified small business corporation shares (line 35 plus line 36) = ^ If lines 14, 31, and 34 are all greater than line 37 and you are bringing a reserve for dispositions before March 19, 2007, of qualified farm property, qualified fishing property, and/or qualified small business corporation shares into 2011 income, complete Part 3b. If this situation does not apply to you, the maximum amount you can enter on line 254 of your 2011 return is the lesser of lines 14, 31, 34 and 37. Enter this amount on line 47 at the end of Part 3b. You can, however, choose to claim less than the maximum. Part 3b – Calculating your capital gains deduction on qualified farm property, qualified fishing property, and qualified small business corporation shares (Step 2) Complete this part if you are reporting a reserve in 2011 on qualified farm property or small business corporation shares disposed of before March 19, 2007, and/or qualified fishing property disposed of after May 1, 2006 and before March 19, 2007. Line 38: Maximum capital gains deduction for qualified farm property and/or qualified small business corporation shares disposed of before March 19, 2007, and/or qualified fishing property disposed of after May 1, 2006 and before March 19, 2007 $250,000.00 Line 39: Capital gains deductions claimed in previous years (line k of Chart 2 on page 4) ^ Line 40: Capital gains deduction available for qualified farm property and/or qualified small business corporation shares disposed of before March 19, 2007, and/or qualified fishing property disposed of after May 1, 2006 and before March 19, 2007, included in your 2011 income (line 38 minus line 39; if negative, enter "0") = ^ Line 41: Line A of Form T2017 ^ Line 42: Line C of Form T2017 ^ Line 43: Line 41 plus line 42; Taxable capital gains from a reserve on qualified farm property and/or qualified small business corporation shares disposed of before March 19, 2007 and/or qualified fishing property disposed of after May 1, 2006, and before March 19, 2007, included in your 2011 income. = ^ Multiplied by on-half = ^ Line 44: Enter the lesser of lines 40 and 43 ^ Line 45: Enter the amount from line 37 in Part 3a ^ Line 46: Line 44 plus line 45; Total amount of capital gains included in your 2011 income that is eligible for the capital gains deduction = ^ Maximum capital gains deduction you can claim at line 254 for disposition of qualified farm property, qualified fishing property, and/or qualified small business corporation shares included in 2011 income is the lesser of the amounts at lines 14, 31, 34, and 46. Enter this amount on line 47. You can, however, choose to claim less than the maximum. Line 47: Maximum amount you can enter on line 254 of your 2011 income tax return ^ T657 E (11) (Page 4 of 4) Chart 1 – Calculating line 26 (net capital losses of other years) Column A Enter the total amount of net capital losses from other years claimed for each year indicated (amount from line 253 of each return). Column B For 1985, 1986, and 1987, enter one-half of the total reserves included in capital gains for capital property disposed of before 1985 (one-half of those reserves reported on your Schedule 3 for 1985, 1986, and 1987). For 1988 and 1989, enter two-third of the total reserves included in capital gains for capital property disposed of before 1985 (two-thirds of the amounts entered on line 395 of Form T2017 for 1988 and 1989). For 1990 and 1991, enter three-quarters of the total reserves included in capital gains for capital property disposed of before 1985 (three-quarters of the amounts entered on line 395 of Form T2017 for 1990 and 1991). Column C For 1992, enter the lesser of the amount from line 127 of your 1992 return and the amount from line (f) in Part A of Form T936 for 1992. For 1993, enter the lesser of the amount from line 127 of your 1993 return and the amount from line (d) in Chart A of Form T936 for 1993. For 1994, enter the amount from line (p) in Chart B of Form T936 for 1994. For 1995, enter the amount from line (m) in Chart B of Form T936 for 1995. For 1996 to 1999, enter the total amount from line 17 in Chart A of Form T936 for 1996 to 1999. For 2000, enter the amount from line 24 in Chart A of Form T936 for 2000. For 2001, enter the total amount from line 17 in Chart A of Form T936 for 2001. For 2002 to 2004, enter the total amount from line 17 in Chart A of Form T936 for 2002 to 2004 plus one-half of the amount from line 11 in Chart A of Form T936 for the same year. For 2005 to 2010, enter the total amount from line 15 in Chart A of Form T936 for 2005 to 2010 plus one-half of the amount from line 11 in Chart A of Form T936 for the same year. Column D For 1992, enter the amount from line (k) in Part B of Form T936 for 1992 For 1993, enter the amount from line (k) in Chart B of Form T936 for 1993. Year(s) *** Transcriber's Note: In print the following was set-up as 8 columns labelled as: Year(s), Columns: A, B, C, D; Column E (C minus D) If negative, enter "0"; Column F (B + E); Column G (A minus F) If negative, enter "0". The format has been changed to a narrative set-up. Please read as: *** \\\ Year(s) 1985 to 1987 Column A: Net capital losses ^ Column B: One-half of the total reserves ^ Column C: N/A Column D: N/A Column E: (C minus D) If negative, enter "0" N/A Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 1988 and 1989 Column A: Net capital losses ^ Column B: Two-thirds of the total reserves ^ Column C: N/A Column D: N/A Column E: (C minus D) If negative, enter "0" N/A Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 1990 and 1991 Column A: Net capital losses ^ Column B: Three-quarters of the total reserves ^ Column C: N/A Column D: N/A Column E: (C minus D) If negative, enter "0" N/A Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 1992 Column A: Net capital losses ^ Column B: Total reserves N/A Column C: lesser of the amount from line 127 of your 1992 return or the amount from line (f) in Part A of Form T936 for 1992. ^ Column D: the amount from line (k) in Part B of Form T936 for 1992. ^ Column E: (C minus D) If negative, enter "0" ^ Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 1993 Column A: Net capital losses ^ Column B: Total reserves N/A Column C: the lesser of the amount from line 127 of your 1993 return or the amount from line (d) in Chart A of Form T936 for 1993. ^ Column D: the amount from line K in Chart B of Form T936 for 1993.^ Column E: (C minus D) If negative, enter "0" ^ Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 1994 Column A: Net capital losses ^ Column B: Total reserves N/A Column C: the amount from line (p) in Chart B of Form T936 for 1994. ^ Column D: N/A Column E: (C minus D) If negative, enter "0" ^ Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 1995 Column A: Net capital losses ^ Column B: Total reserves N/A Column C: the amount from line (m) in Chart B of Form T936 for 1995. ^ Column D: N/A Column E: (C minus D) If negative, enter "0" ^ Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 1996 to 1999 Column A: Net capital losses ^ Column B: Total reserves N/A Column C: the total amount from line 17 in Chart A of Form T936 for 1996 to 1999. ^ Column D: N/A Column E: (C minus D) If negative, enter "0" ^ Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 2000 Column A: Net capital losses ^ Column B: Total reserves N/A Column C: the amount from line 24 in Chart A of Form T936 for 2000. ^ Column D: N/A Column E: (C minus D) If negative, enter "0" ^ Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Year(s) 2001 to 2010 Column A: Net capital losses ^ Column B: Total reserves N/A Column C: For 2001 to 2004, enter the total amount from line 17 in Chart A of Form T936 for 2001 to 2004. ^ Column C: For 2005 and 2009, enter the total amount from line 15 in Chart A of Form T936 for 2005 and 2009. ^ Column D: N/A Column E: (C minus D) If negative, enter "0" ^ Column F: (B + E) ^ Column G: (A minus F) If negative, enter "0" ^ Add the amounts in column G and enter the result on line 26 in Part 2 of this form. Due to space restrictions, some years have been combined on a single row on this chart. However, to ensure a correct result, do the calculations separately for each year that applies to you. Chart 2 – Calculating lines 33 and 39 (capital gains deductions from previous years) Line a: Total capital gains deductions claimed after 1984 and before 1988 (line 254 of your 1985 to 1987 returns) ^ Line b: Capital gains deductions claimed in 1988 and 1989 excluding eligible capital property (line 254 of your 1988 and 1989 returns minus any amounts reported on lines 543 and 544 on Schedule 3 for 1988 and 1989; if negative, enter "0") ^ Line c: Adjustment of 1988 and 1989 capital gains deductions excluding eligible capital property (enter one-quarter of amount on line b) ^ Line d: Capital gains deductions claimed in 1988 and 1989 for eligible capital property (total of lines 254 of your 1988 and 1989 returns minus the amount on line b above; not to exceed the total of lines 543 and 544 on Schedule 3 for 1988 and 1989) ^ Line e: Adjustment of 1988 and 1989 capital gains deductions for eligible capital property (enter one third of amount on line d) ^ Line f: Total capital gains deductions claimed in 1990 to 1999 (line 254 of your returns for these years) ^ Line g: Adjustment of 1990 to 1999 capital gains deductions (enter one-third of amount on line f) ^ Line h: Total capital gains deduction claimed in 2000 (line 254 of your 2000 return) ^ Line i: Adjustment of 2000 capital gains deduction. Amount from line h multiplied by [1 minus (1 divided by (2 multiplied by IR*))] ^ Line j: Total capital gains deduction claimed in 2001 to 2010 (line 254 of your returns for these years) ^ Line k: Total of lines a to j ^ *IR represents your inclusion rate for 2000. This rate is from line 16 in Part 4 of Schedule 3 for 2000, or from your notice of assessment or latest notice of reassessment for 2000. Privacy Act, Personal Information Bank number CRA PPU 005