Losses incurred before May 23, 1985

Special rules apply to losses you incurred before May 23, 1985. This also includes losses you incurred after May 22, 1985, on any disposition of capital property made under an agreement of sale you entered into before May 23, 1985.

Usually, you can apply net capital losses of other years only against taxable capital gains. However, if you incurred the losses before May 23, 1985, you may use them to offset other income.

Once you have applied your net capital losses of other years against taxable capital gains, you can use any excess to offset other income. The amount you can use is limited to the least of:

• the excess amount;
• $2,000; and
• your pre-1986 capital loss balance available for 2009.

Your pre-1986 capital loss balance available for 2009 is:

• the unapplied balance of your total net capital losses that you had at any time before May 23, 1985;
  minus
• the total adjusted amount of capital gains deductions that you claimed before 2009.

If you had a net capital loss during the period from January 1, 1985, to May 22, 1985, and you had taxable capital gains later in 1985, your taxable capital gains will reduce your pre-1986 capital loss balance.

Completing your return

Complete Chart 5 if you have a balance of unapplied net capital losses from before May 23, 1985, or you want to keep a breakdown of your unapplied net capital losses by year.

Enter the amount you want to claim as a deduction on Line 253 of your return.

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