T3RET Capital loss carry back

Tax Topics
1

My personal Trust has a capital loss in 2023. Public securities sold at a loss.
The Trust had capital gains in 2020, 2021, 2022 in excess of the loss.
The Trust always allocates all income to the beneficiaries so has no taxable income.

I am able to complete the T3A to Request a Loss Carryback by a Trust. This results in a loss on line 1220 of Schedule 1 but the loss is not transferred to Line 1 on the T3RET. Line 1 on T3RET shows 0 and cannot be overridden with a negative value.

So 2 questions:

  1. Should the capital loss not flow to the T3RET and be able to deduct against other income before allocating to the beneficiaries?

  2. If I am forced to carry forward the capital loss, will it flow through to be deductible in future years or will I have to do some soft of manual override?

2

Generally speaking a trust can only carry back a net capital loss if the taxable capital gain was subject to tax inside the trust. A trust can not allocate a loss carryback to beneficiaries. Thus, a trust that realizes a capital loss will usually only be able to carry the loss forward and use it to offset capital gains in the future. I think the restriction is imposed by subsections 104(13.1) for non-capital losses and 104(13.2) for net-capital losses.

3 Likes
3

Thank you.