Good afternoon. It would appear you have an error in form T657 that can significantly impact the calculation of the cumulative gains limit, in particular with how you calculate the "Eligible Taxable Capital Gains" amount.
The ETCG is = to A in the definition of Annual Gains Limit in 110.6. "A", which is the lessor of the following, can not be less than 0 but your program is calculating it to be.
A is the lesser of
(a) the amount determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses, and
(b) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties, qualified farm or fishing properties and qualified small business corporation shares
A is comparing to numbers and selecting the lessor of the two. (a) The amount of capital gains and capital losses determined for the year under paragraph 3(b) and (b) the same amount if only Qualified property was considered.
"A" cannot be less than zero because it is specifically referencing the amount determined under paragraph 3(b).
3. Income for taxation year
The income of a taxpayer for a taxation year for the purposes of this Part is the taxpayer's income for the year determined by the following rules:
(a) n/a
(b) determine the amount, if any, by which
(i) the total of
(A) all of the taxpayer's taxable capital gains for the year from dispositions of property other than listed personal property, and
(B) the taxpayer's taxable net gain for the year from dispositions of listed personal property,
exceeds
(ii) the amount, if any, by which the taxpayer's allowable capital losses for the year from dispositions of property other than listed personal property exceed the taxpayer's allowable business investment losses for the year,
Paragraph 3(b) is not A-B but rather how much the total gains in a year EXCEED the total losses in a year. If the losses are greater than the gains (i.e. the gains do not exceed the losses), than the amount determined under paragraph 3(b) is 0. If the amount in 3(b) could be a negative then capital losses in a year could reduce the total income calculated in section 3 and well that would be great if true.
Bringing this back to the calculation of ETCG, if you had for example QSBCS gains in the year = $100,000 but your total capital dispositions from all capital property in the year resulted in a loss of $500,000, then your ETCG = 0 and not negative $500,000 which is what your program calculates. In the current year it won't matter because your annual gains limit will be 0 and therefore you do not get any exemption in the year. The issue is that A in the definition of cumulative gains limit is the aggregate of all the Eligible Taxable Gains from current year and all prior years. Therefore in a year where you have a loss on say securities, this is resulting in a grind to your cumulative gains limit for future years. This is incorrect. Notice in the second half of the cumulative gains limit, there is already a reduction for losses in other years that are applied against eligible taxable capital gains.
I have confirmed that in turbo tax the negative number that you are allowing to pull into the line 8 (eligible taxable capital gains) is on roll-forward reducing the cumulative gains limit.
Ryan
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