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OAS Repayment Calc with Certain Capital Gains

There are likely to be very few clients who might be in this situation, however, if a person collecting OAS has a large capital gain in Section 6 on Schedule 3 (Other mortgage foreclosures and conditional sales repossessions), the OAS clawback doesn’t calculate.

On the Social Benefits Repayment Worksheet the capital gain ends up being incorrectly categorized as “RDSP Income”, and this amount gets deducted from the income calculation.

Example;

Person with date of birth before 1953
Enter 7121.31 on the T4A(OAS) slip
Enter 400,000 as Proceeds in Section 6 of Schedule 3 (Capital Gain = 400k)
Instead of 7121.31 in Social Benefits Repayment on line 235, the software calculates as zero.
The Social Benefits Repayment Worksheet somewhat explains what is happening here.

Section 79 gains are excluded when determining adjusted net income used in the calculation of several amounts and credits. Social benefit repayment, refundable medical supplement, WITB, Age amount, GST/HST credit and Canada Child Benefit are examples.

Using the clawback as an example, this the definition from section 180.2:
adjusted income of an individual for a taxation year means the amount that would be the individual’s income under Part I for the year if in computing that income no amount were
(a) included
(i) under paragraph 56(1)(q.1) or subsection 56(6),
(ii) in respect of a gain from a disposition of property to which section 79 applies, or
(iii) in respect of a gain described in subsection 40(3.21), or
(b) deductible under paragraph 20(1)(ww) or 60(w), (y) or (z). (revenu modifié)

1 Like

Thank you for that Allen, hopefully I didn’t waste too much of your time.
I did not know that capital gains on mortgage forclosures and repossessions were exempt from determining net income for Clawback purposes.

When I was trying to figure out why there was not OAS clawback I guess what threw me is in the Social Benefits Repayment Worksheet is that TaxCycle categorizes those gains as “Registered Disability Savings Plan Income” (line 125 of the T1) in order to remove them from adjusted net income.