Dear Sirs:
Re: Subsection 111(1) of the Income Tax Act-Carry-back of losses
We are replying to your letter of November 26,1990, wherein you requested that we confirm your understanding that a non-capital loss carried forward could be preserved in the following hypothetical situation.
You describe the facts regarding your enquiry as follows:
1. Company A had capital gains in both 1987 and 1988.
2. Company A utilized non-capital losses to shelter these capital gains in both 1987 and 1988.
3. In 1990 Company A incurred a capital loss.
4. Company A wishes to carry back the capital loss incurred in 1990 to offset the capital gains earned in both 1987 and 1988 and thereby reinstate the non-capital losses claimed in those prior years.
Our comments
Provided the years 1987 and 1988 are still open for reassessment pursuant to subsection 152(4)(c) of the Income Tax Act, and the taxpayer is eligible to have the loss applied in the manner requested, the Department will generally accede to a request to substitute one loss for another.
Regarding your enquiry as to how one goes about requesting an adjustment to the prior years returns, we have been advised by our T2 Processing Division that a covering letter together with the appropriate forms T2A, duly completed, will suffice.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch