A taxpayer who invested $30,000 in a farming limited partnership was thereafter allocated farm losses for the partnership’s first two taxation years of $25,000, then $75,000, but with the taxpayer limited to a deduction of $8,750 by s. 31. CRA stated:
Under clause 53(2)(c)(i)(B) … the ACB of an interest in a partnership must be reduced by … farm losses without regard to section 31.
… The ACB of the taxpayer's interest would therefore be reduced by $75,000 even though the taxpayer has an unused restricted farm loss of $57,500.
The Act does not allow the unused restricted farm loss to be deducted against the deemed capital gain pursuant to subsection 40(3.1).