Hi experts, does anyone know how to Adjust-T1 final for capital loss from T3 under section 164(6). The T3 return had a capital loss in 2022, I want to transfer that capital loss to 2021-T1 final. The T1-final had capital gains. I need to know what form/ line number on T1-Adj needs to be changed to apply T3 capital loss under section164(6). I would appreciate your help on this. Thanks.
You just adjust the capital gain/loss amount, and then explain it in the notes section.
Expect a review by CRA before it they reassess based on your request. We had to send in the T3 and our calculation of the loss.
Thanks @jglass. I waited 40 minutes to talk to CRA and call dropped when I was talking. Again, on hold for the last 20 minutes to clarify this.
Are you referring to Line#19700 (total capital gains) on Schdule3, which will change the result on Line12700 (taxable capital gains) on T1-final. If yes, the issue is Line19700 (total capital gains) is a calculated field, do I have to manually override this Line#?
Secondly, Does notes on T1-Adj gets transmitted to CRA? I spoke with tax cycle earlier and was told that notes do not get transmitted to CRA. To add reference paper file it. Any comments.
I don’t like overwriting, so I created a new line item on the S3 in TaxCycle and put the ACB equal to the loss amount.
This forced the calculation and gave me the correct “new value” to enter on “adjust my return” online to make the adjustment, I did not use TaxCycle’s Re-File feature. I have no idea if the notes get transmitted or not in Re-File.
But regardless of what you do or don’t send in, or how you send it, CRA is likely to review before they allow the adjustment, so you’ll get a chance to explain it.
Thanks @jglass. Sorry, if I being a pest. Are you creating a new line item on S3 while you are in MyAccount “change my return”.? If yes, how do you create a new line while you are in “change my return”. Do you right clik or what’s the way to do it. Thx.
See edits above.
Using “change my return” is pretty self explanatory on the website.
Capital losses in the estate can be carried back to the final T1 under the provisions of subsection 164(6) provided those capital losses are incurred in the first taxation year of the estate.
The amount that you elect under subsection 164(6) gets entered in field 1646 of Schedule 1 of the T3 return. This carry back gets entered as a Positive Number (this is why the instructions on that line say do not put this amount in brackets).
Entering the amount in field 1646 (line 19) of Schedule 1 of the T3 return is considered to be the election and it is “supposed to” trigger an automatic reassessment of the T1 return. In some cases I have found the CRA will automatically do this… but in most cases I have found they do not automatically process the election and re-assess the T1.
The loss needs to be established before it can be carried back. Generally the loss has not been established until the T3 has been filed and assessed by the CRA.
@jglass has outlined the proper procedure for writing the loss back to the T1 return. Even though this is technically a “loss carryback” the amount of the carryback under subsection 164(6) actually gets processed as a reduction to T1 line 12700 (Taxable Capital Gains) rather than a deduction for capital losses on line 25300.
I don’t tend to make an adjustment to the T1. If the adjustment doesn’t get processed automatically upon filing the T3 return, I usually send a letter with the T3 Schedule 1 (highlighting the amount on line 1646), a copy of the T3 Notice of Assessment, and requesting an adjustment of $xxxxx. to line 12700 of the T1 return. @jglass has a better procedure.
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I’ve never had much luck with the “CRA is supposed to…” things!
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Thanks to both @jglass and @snoplowguy.
T3 is already dealt and done with correctly under 164(6) along with the letter. It’s the T1-Adj which was confusing. CRA told me that full T1-Adj is required within deadline with very clear 164(6) note. Tax cycle told me that notes do not get transmitted, my only option is paper filing. I really don’t want to paper file so I post this question to experts.
I really liked @jglass creative idea to adjust capital loss through “change my account”. However, if I add new value in “change my return”, would it automatically change other tax lines impacted as a result of this change? I don’t have to manually change any other line item… am I right? For e.g., had I be doing this through Refile, it automatically changes the value for all impacted other tax lines15000,23600,3000,33500, 33800 etc. Thanks again.
Hi, on this topic of 164(6), have you had success in obtaining a refund from CRA with no penalty if you submitted a request to adjust/amend the terminal T1 only after receiving the assessment of the T3 (which had a positive amount indicated in line 1646 of the T3)? If so, how long after receiving the T3 assessment did you send in the request to amend/adjust T1?
@snoplowguy sorry, meant to tag you in my post above, thanks. But also interested if anyone else also has experience with this.
You do realize that this is a line on the T3’s Schedule 1, near the bottom…
No T1 Adjustment is actually needed.