Does s. 104(13.3) establish that designations under s. 104(13.1) or (13.2) can only be made so as to apply non-capital or capital losses of other years to bring taxable income down to nil? If a trust realizes a non-capital or capital loss in one of its subsequent three taxation years, is it permissible to amend its return for the particular year to include the amount of income paid or payable to beneficiaries in its income, thereby resulting in net income that can be offset by a loss carryback?
After agreeing with the first proposition, CRA indicated that, although the Act does not specifically provide for the late-filing of s. 104(13.1) or (13.2) designations, at the 2009 APFF Conference, CRA noted that it would accept a late-filed s. 104(13.1) designation where a designation is made in respect of a carryback of a non-capital loss. The CRA would only reassess beneficiaries' income and make a corresponding adjustment to the trust's income tax return if the tax years to which they related were not statute-barred and provided that there was no retroactive tax planning.
Similarly, CRA generally would accept a late-filed (13.2) designation where the trust had a capital loss carryback to apply against capital gains, subject to the caveats mentioned above.
