2009 noncapital loss against large arrears interest paid over time

[Stargazer]

I don’t want to get lost in the weeds, but I could use the wisdom of those more experienced than I.

I have a new client (because he became the common-law partner of an existing client on Dec 31, 2024), and I found a can of worms. He has had a huge fluctuating balance owing going back to 2010 tax year.

It’s a long tale of woe, depression, bankruptcy, divorce, injuries, and ostrich-ing the problem (i.e. head in the sand hoping it would just go away…$140k tax debt from 2010 assessed by CRA doing the return for you in 2016 doesn’t ostrich away).

In 2019, there was a massive adjustment to the 2010 return that resulted in over $70k in reversed interest and penalties alone. The balance owing became $50k in 2019. He got a great job post-lockdowns has been paying it down, and while I can’t see the current account balance because it “won’t display due to condition on account”, it is paid off as of 2023s return going by the statements in his CRA mail.

So here I am ready to do 2024s return and AFR brings in a noncapital loss from 2009 for ~$20k.

The interest being charged on his balance owing is between 5%-10% depending what statement I’m looking at. Splitting the difference, 7% interest was $2.88 every 30 days and 8% was $3.30 for every $500. So round it to $3 for 7.5% average underestimated (exact difference is $3.09)

My estimation: The 2015 refund would change by $6000 for 120 months since 2015. $6000/$500 =12. 12x$3/month=$36 average interest a month x 120 months = $4320
+$6000 2015 refund = $10320 back to client. He didn’t owe less than $6k until August 2024, so it’s closer to $10,100.

If I put it on 2024, his refund is ~$8200.

Am I oversimplifying the returned interest and overestimating the actual refunded total for adjusting 2015?

Would you adjust 2015 (or some other year between now and then) or put it on 2024?

Will CRA even do this noncapital adjustment for 2015 or would they refuse on some technicality?

[kevin]

CRA, according to their information, will calculate refund interest based on the latest of four dates.
Two of these would seem to be pertinent to your client. The first is the date a prescribed form (ie Sch 4) or an amended return is filed. The second is the date on which a request is made in writing to reassess a year to take into account a loss from another tax year.

Although you won’t get refund interest from the NCL claim, the reduced balance seems to be worthwhile in terms of reduced interest on the $50K balance after the 2015 year. You may want to check with CRA to confirm the existence of this non-capital loss.

[helga_spence]

From ChatGTP:
Claiming a 2009 non-capital loss on a 2015 return that you’re amending in 2025 involves a few key considerations related to the carryforward rules and amendment deadlines set by the Canada Revenue Agency (CRA) . Here’s a breakdown:

---

1. Loss Carryforward Rules (Canada):

• Non-capital losses can be carried:
  • Back 3 years.
  • Forward 20 years (as per rules in place since 2006).

Therefore:

• A 2009 non-capital loss can be carried forward to offset income in any year from 2010 to 2029 .

So using the 2009 loss on a 2015 return is perfectly allowable in terms of carryforward eligibility .

---

2. CRA Amendment Time Limits:

CRA generally allows:

• 10 years from the end of the tax year to request an adjustment (i.e., amend a return).

For 2015 , the deadline to request a reassessment is:

December 31, 2025

So, if you’re requesting the amendment before the end of 2025 , you’re within the allowed timeframe .

---

Conclusion:

Yes, you can claim a 2009 non-capital loss on a 2015 tax return as long as you amend it by December 31, 2025 .

---

Tip:

You’ll need to file a T1 Adjustment Request (T1-ADJ) and include documentation showing the 2009 loss and how it’s being applied to 2015.

Let me know if you want help drafting that request or checking if there’s any restriction based on the type of income in 2015.