CRA finds that a partner does not have the discretion to not recognize a partnership loss allocated to it

CRA found that a partner was required to include in computing its income the amount allocated to it by the partnership as a loss from its business (presumably reflecting the deduction by the partnership of discretionary deductions), rather than the partner having the discretion to not include that loss in computing its income under s. 3. CRA stated:

[C]laiming a deduction in computing a loss from a source and including the loss itself from a particular source in the computation of net income for the year are two distinct concepts. The fact that one (i.e. claiming a deduction) may be discretionary does not lead to the conclusion that the other (i.e. including a loss) is also discretionary.

Where taxpayers have discretion in respect of the utilization of a loss, it is expressly provided for under the relevant provisions of the Act, such as subsection 111(1) … . Such discretion is not provided for in respect of current-year losses under paragraph 3(d) … .

Neal Armstrong. Summary of 20 March 2026 Internal T.I. 2025-1061521I7 under s. 96(1)(g).