A trust carries back an allowable capital loss realized in a subsequent year and files a late s. 104(13.2) designation to include in its income a taxable capital gain realized for that previous year that was previously allocated out to the beneficiaries. Their returns for that year would then be amended to remove the capital gain. Is that permissible?
CRA, after confirming that a trust can make a late s. 104(13.1) or (13.2) designation as long as the application of the loss results in nil taxable income of the trust for the previous year, indicated that it will reassess the beneficiaries’ returns for that year to remove that gain provided that their returns are not statute-barred.
CRA further indicated that:
- the T3A loss carryback request, and the T3 adjustment request for the previous year, should be filed together so that they can be processed concurrently;
- the trust should issue amended T3s; and
- the beneficiaries would need to file T1 adjustment requests.