Snowplow - I don’t see that a legal basis exists for an election to be possible without the T3 being filed.
1 Like
Agreed. I also feel the loss needs to be established before it can be used.
1 Like
It appears like the CRA’s policy is the same; They will not allow a capital loss incurred in the graduated rate estate to be carried back to the final T1 return until the T3 return has been filed and assessed.
This morning I saw this;
2 Likes
I know this is a very late reply, however, I followed the recommendations given, filed the T3, waited for the assessment and then did the Loss Carryback to the T1. Worked a treat! and the refund has come back!
Thanks so much for your help.
Another very late reply… but something I saw yesterday.
A client of mine brought in a Notice of Reassessment for his deceased mother (who was not a client). The Reassessment was dated March 2022 and related to the 2018 taxation year. The explanation of changes simply said “your return has been re-assessed to properly report the subsection 164(6) election”. The accountant who handled the estate is completely puzzled with the re-assessment and is trying to follow up with the CRA so I explained it to the client as best I could.
There was no change to the income tax payable, but there was merely arrears interest assessed of just under $50,000.
It seems the accountant who prepared her final T1 return correctly reported a capital gain of about $3 million in Holdco shares on her final T1 return, but then also claimed the 164(6) loss carry-back for a capital loss that was going to be incurred by her estate as another entry on the schedule 3 of the T1. Without the loss carry back she would have owed around $1m income tax. The loss carry back reduced her amount owing to around $200k
Although the capital loss was known at time of filing the T1 return the actual capital loss did not technically arise in the estate until about a year later, when the T3 was due to be filed. Essentially, the accountant jumped the gun.
CRA’s position is she was liable to pay the $1 million income tax upon filing of yer 2018 T1 return. It wasn’t till the filing of the T3 return that the capital loss was generated and available to be carried back. At that point they would have refunded the client about $800k (which they would not pay refund interest on). Since the extra $800k was never paid in the first place the CRA is demanding interest on the difference between what was paid on filing and what should have been paid.
Glad it wasn’t me. 
2 Likes
How do you amend the T1? I thought you should be able to enter the loss on line 25300 [net capital losses of other years] and then file a T1 adjustment through T1 Efile.
I read this last month in Tax Interpretations and it seems CRA things there is a difference between an amendment and a T1 Adjustment:
CRA indicates that a s. 164(6) amendment must be made through filing an amended return, not a T1 Adjustment Request
13 July 2022 - 10:26pm
The conditions for allowing capital losses of a graduated rate estate in its first taxation year to be considered capital losses of the deceased pursuant to s. 164(6) include that an election is filed, and the legal representative amend the deceased’s final T1 return of income. CRA indicated that to make the election, s. 164(6)(e) requires the legal representative to file an amended final T1 return of income for the deceased taxpayer to give effect to the election made under s. 164(6)(c). Filing a T1 adjustment request is not sufficient.
Am I missing something?
You and me both… 
My understanding was the only time you could actually file an “Amended T1 return” was if an assessment had been raised under subsection 152(7). Try efiling a second T1 return for a client and see how far that gets you…
I think the only thing you can amend on a T1 return is to change information on a specific line number or line numbers on a previously submitted return. You can not resubmit a T1 return and call it amended. Somehow they have the semantics messed up.
The only way that I have handled the 164(6) election is to tick the appropriate box on the T3 return, then send in a letter requesting the loss carry back to the final T1.
2 Likes