Dear Sirs:
Re: Alternative Minimum Tax
This is in reply to your letter of August 29, 1990 concerning the capital gains deduction and the alternative minimum tax (the "AMT") We apologize for the delay in responding to your request.
In the example you present, an individual has a taxable capital gain eligible for the capital gains deduction of $50,000. In the same year the individual has net business losses of $50,000, producing a net income of nil. The individual claims the amount of $50,000 as a capital gains deduction with the result that the individual "deducted" that amount under section 110.6 of the Act. The $50,000 so deducted would then be added in the calculation of the individual's non-capital losses under paragraph 111(8)(b) of the Act, resulting in a non-capital loss of $50,000 for the year.
You have asked whether, in calculating the AMT in the above situation, the $50,000 deducted under section 110.6 would be considered to have been deducted for the purpose of calculating "adjusted taxable income" under section 127.52 of the Act.
After a review of the interaction of the provisions of sections 110 6, and paragraphs 111(8)(b) and 127.52(1)(h), we have concluded that where an individual claims the full amount of the capital gains deduction under section 110.6 for purposes of computing taxable income, that deduction will be recognised as having been deducted and therefore deductible under paragraph 127.52(1)(h) of the Act in determining adjusted taxable income for AMT purposes. Thus, in your example, $50,000 may be claimed under paragraph 127.52(1)(h) of the Act, thereby reducing the amount of adjusted taxable income for the purpose of determining the AMT.
We trust this information will be of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch