A corporation has non-capital loss carry forwards and net capital loss carry forwards. How does management...

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A corporation has non-capital loss carry forwards and net capital loss carry forwards. How does management...

A corporation has non-capital loss carry forwards and net capital loss carry forwards. How does management decide which of these carry forwards should be deducted first?

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business accounting

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Answer 1

Answer #1

Non-capital losses generally include losses from a business or employment. These losses can be applied to reduce all sources of income in the current tax year, the previous 3 years and the next 20 years.

Net-Capital losses are losses incurred from the sale of capital property (e.g. shares, mutual funds, land, buildings, tangible assets). These losses can only be applied against taxable capital gains in the current tax year or subsequent years. Net capital losses do not expire.

So, corporation should deduct first non-capital loss as it has some limit to expire and whereas net capital losses can be adjusted any number of years but only against capital gains.

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Answer 2

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