*The Commerce Journal>>>Canada Taxes

Can you use non-capital losses to offset capital gains?

Let's say you made a loss short-selling stocks (income account), but you made more profit going long on stocks (capital gain). The amount taxable from the profit is 50% of that. In the end, does the non-capital loss "cancel" out some of that 50% taxable income?

No, you cannot use the non capital losses that way. Only capital losses offset capital gains.

If there are no capital gains to offset in the current year, the capital losses can be applied to capital gains reported in the previous three years. Or they can be carried forward indefinitely.

The only time they can be used to reduce other income is in the year of a taxpayer's death, or the immediately preceding year. At this time, 1/2 (50%) of the capital loss would be used to reduce other income. For more on this topic, see the Canada Revenue Agency (CRA) interpretation bulletin IT232R3 - Losses - Their Deductibility in the Loss Year or Other Years (paragraph 30).

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