J.A. Szeszycki (613)957-2130
SEP 17 1987
Dear Sirs:
Re: Capital Gains Deduction
This is in response to your letter of June 22, 1987, enquiring as to whether the form (T657) and guide that have been produced in connection with the administration of the capital gains deduction reflect the wording and intent of the provisions of the Income Tax Act ("the Act").
Subsection 110.6(3) of the Act contains the computation that was explained in our letter of June 10, 1987 and is structured in such a way as to place a restriction or limitation on the amount that may be claimed under this section in any given year, as evidenced by the use of the phrase "not exceeding the least of". Paragraph (c) of this subsection refers to the "annual gains limit" as one of the "least of" amounts. The annual gains limit is specifically defined in subsection 110.6(1). Paragraph (a) of this definition begins with "the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses..." restricting the capital gain amounts to be used in this calculation to the capital gains realized in the year in question.
In our opinion it is clear, from the way that the legislation is written that it was not intended that the capital gains deduction allowed in any particular year would exceed the net taxable capital gains realized in that year, permitting the excess to be applied against other income in the year. In our view, the form T657 and the T1 Guide for Capital Gains correctly reflect the intent and the wording of the Act.
We hope the foregoing adequately addresses your concerns.
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch