How are other year losses carried forward to 2011?

You can apply your net capital losses of other years to your taxable capital gains in 2011. However, the amount you claim depends on when you incurred the loss. This is because the inclusion rate used to determine taxable capital gains and allowable capital losses has changed over the years.

You have to apply net capital losses of earlier years before you apply net capital losses of later years. For example, if you have net capital losses in 1994 and 1996 and want to apply them against your taxable capital gains in 2011, you have to follow a certain order. First apply your 1994 net capital loss, then apply your 1996 net capital loss against your taxable capital gain. Keep separate balances of unapplied net capital losses for each year. This will help you keep track of your capital losses.

You can use a net capital loss of a previous year to reduce a taxable capital gain in 2011. If the inclusion rates for the two years are different, you must adjust the amount of the net capital loss to match the inclusion rate for 2011. Determine the adjustment factor by dividing the inclusion rate for 2011 by the inclusion rate for the year in which the loss arose.

Note
When you apply a net capital loss from a previous year to the current year's taxable capital gain, it will reduce your taxable income for the current year. However, your net income, which is used to calculate certain credits and benefits, will not change.

Completing your return

To apply your net capital losses of other years against your taxable income, enter the amount you are claiming as a deduction on line 253 of your 2011 income tax and benefit return.

Special rules apply if you have a balance of unapplied net capital losses from before May 23, 1985. Before claiming your deduction, see Losses incurred before May 23, 1985.

If you do not have a balance of unapplied net capital losses from before May 23, 1985, and your 2010 notice of assessment or reassessment shows that you have unapplied net capital losses of other years and/or a 2010 net capital loss, you can use the following chart to determine your net capital losses of other years that you can apply to 2011:

For more information on determining your net capital losses of other years that you can apply to 2011 and your unapplied balance that you can carry forward to future years, see Determining your net capital losses of other years you can apply against 2011.

Forms and publications

• Guide T4037, Capital Gains
• IT232, Losses - Their Deductibility in the Loss Year or in Other Years

Related Topics

• Line 253 - Net capital losses of other years
• Summary of loss application rules