Chapter 3: Employment Losses and Non-Capital Losses Flashcards
What does ITA 5(2) state about employment losses?
ITA 5(2) allows for employment losses to occur, meaning that if allowable employment deductions exceed employment income, the excess deductions are considered a loss.
These employment losses are calculated in the same way as employment income.
Can employment losses be applied against other sources of income?
Yes, employment losses under ITA 5(2) can be applied against other sources of income, such as property income or capital gains, to reduce total net income.
How is net income calculated when there is an employment loss and other sources of income?
Net income is calculated by subtracting the employment loss from other sources of income, such as income from property.
Example formula:
Net Income = Income from Property - Employment Loss
What happens if an individual only has an employment loss and no other income?
If an individual has an employment loss with no other income, their net income would be nil, and they would have a non-capital loss equal to the employment loss, which can be carried forward to future years.
What is a non-capital loss under ITA 3(d)?
A non-capital loss occurs when allowable employment deductions exceed income in a given year.
The loss can be carried over to offset income in future taxation years.
