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Schedule 6, Summary of Dispositions of Capital Property

Federal Schedule 6, Summary of Dispositions of Capital Property

You have to complete Schedule 6 if you disposed of capital property during the tax year and incurred any capital losses or realized any capital gains. You also have to complete this schedule if you claim an allowable business investment loss.

References
Section 54
IT-170, Sale of Property - When Included in Income Computation
IT-448, Dispositions - Changes in Terms of Securities
IT-460, Dispositions - Absence of Consideration
S3-F4-C1, General Discussion of Capital Cost Allowance

Designation under paragraph 111(4)(e)

Answer yes or no to the question on line 050, page 1 of Schedule 6.

You can make a designation under paragraph 111(4)(e) if a person or group of persons has acquired control of the corporation. If you make the designation, capital properties will be considered as having been disposed of immediately before that person or group of persons acquired control of the corporation.

Completing Schedule 6

To help you complete Schedule 6, the following explanations briefly set out the type of information to enter in each column and each part of the schedule.

Date of acquisition

In this column, give the date you acquired the property.

Proceeds of disposition

In this column, indicate the proceeds of disposition. The proceeds of disposition are usually the selling price of the property. However, they can also include compensation the corporation received for property that was destroyed, expropriated, stolen, or damaged.

For a gift or a deemed disposition, the proceeds of disposition are usually the fair market value of the property when its owner or use changes.

References
Section 54
S3-F3-C1, Replacement Property

Adjusted cost base

In this column, indicate the cost of the property you used to calculate any capital gain or loss. This amount is called the adjusted cost base (ACB). The ACB is the original cost of the property that has been adjusted to reflect certain transactions or occurrences that took place after acquiring the property.

The cost of a capital property may be the actual cost, a deemed cost, or the valuation-day value of the property. The nature of the property and the circumstances under which you acquired it determine which cost of the capital property you should use.

References
Subsections 53(1) and 53(2)

The cost of property acquired after 1971 is usually the actual cost of acquiring it, including the purchase price plus any related costs, such as commissions, legal fees, and other reasonable expenses. It also includes the cost of additions and improvements to the property. It does not include current expenses, such as maintenance and repair costs.

Special rules apply when determining the cost of capital property owned on December 31, 1971. According to these rules, tax is not assessed and losses are not allowed for any gain or loss that arose before that date.

When deductions from the cost base of a property (other than a partnership interest) reduce the balance to a negative amount at any time in the tax year, you are considered to have realized a capital gain equal to the amount of the negative balance, and the ACB becomes nil.

You cannot use later additions to the ACB to reduce previous gains on the property that resulted from a negative balance. You can only consider these additions when you determine future gains or losses.

Reference
Subsection 40(3)

Paragraphs 53(1)(e) and 53(2)(c) outline the rules for determining the ACB of a partnership interest.

You have to reduce the ACB of a partnership interest by the amount of any share purchase tax credit, and one-half of any scientific research and experimental development tax credit the partnership allocated to the corporation.

Note
Interests in a partnership that a limited partner or an inactive partner holds are subject to the negative ACB rule.

Outlays and expenses

In this column, enter the amount of outlays and expenses you deducted when calculating a gain or loss. You can deduct most cash outlays the corporation used to put a property into saleable condition when you calculate a gain or loss. You can also deduct expenses incurred when disposing of the property. These expenses include certain fixing-up costs, finder's fees, commissions, surveyor's fees, transfer taxes, and other reasonable expenses incurred to dispose of the property.

Gain (or loss)

In the last column, enter the amount of the gain or loss as instructed.

A capital gain results when the proceeds of disposition of a capital property are more than the ACB and any related outlays or expenses. A capital loss occurs when the proceeds of disposition are less than the ACB and the related outlays and expenses. However, if depreciable property is disposed of, it will result in a terminal loss, not a capital loss. See "Column 10 - UCC" (undepreciated capital cost) on page 51 for more details about terminal losses.

In certain cases, when you dispose of a building and the land on which it stands, and the building is disposed of for less than its undepreciated capital cost, you may have to reduce the gain on the sale of the land by the terminal loss on the sale of the building.

Reference
Subsection 13(21.1)

If you dispose of crypto-assets and other similar properties other than in the course of a business that you operate or an adventure in the nature of trade, the CRA may consider any resulting gain or loss to be a capital gain or capital loss. For more information, go to canada.ca/cra-crypto-assets or see Guide T4037, Capital Gains.

Categories of capital property

There are six categories of capital property you may have disposed of during the tax year. The categories are:

The first six parts of Schedule 6 reflect these six categories of capital property.

Part 1 - Shares

In this part, list the shares disposed of during the tax year. Give the number of shares, the name of the corporation in which the shares were held, and the class of the shares.

Usually, disposing of a share of the capital stock of a corporation will result in a taxable capital gain or an allowable capital loss. However, if the corporation that is disposing of the share is in the business of trading shares, the resulting gain or loss is considered business income or loss.

If a share is converted because of a merger or an amalgamation, subsection 248(1) deems a disposition to have occurred.

Under paragraph 112(3)(b), a corporation (the shareholder) must reduce the losses from the disposition of shares held as capital property by certain dividends received for those shares. This is called a stop-loss rule. Generally, this rule does not apply when the shareholder owns less than 5% of the shares and has held these shares for over a year.

On line 160, enter the total adjustment for such losses identified in Part 1. Enter the total amount of gain or loss realized on disposition of shares at amount A.

Reference
IT-328, Losses on Shares on Which Dividends Have Been Received

Part 2 - Real estate

In this part, list all real estate disposed of during the tax year. Give the municipal address of each property.

Dispositions of non-depreciable real property (unless the property is inventory) may result in a capital gain or loss. However, dispositions of depreciable property may result in a capital gain, a recapture of CCA, or a terminal loss.

See "Column 10 - UCC" (undepreciated capital cost) on page 51 for details about terminal losses and recaptures.

Enter the total amount of gain or loss realized on disposition of real estate at amount B.

Reference
IT-218, Profit, Capital Gains and Losses From the Sale of Real Estate, Including
Farmland and Inherited Land and Conversion of Real Estate From Capital
Property to Inventory and Vice Versa

Part 3 - Bonds

In this part, list all bonds disposed of during the tax year. Give the face value, the maturity date, and the issuer's name for each type of bond.

When you make a capital disposition of a debt obligation, the amount of any realized discount or bonus received is usually considered a capital gain. Similarly, a premium paid is considered a capital loss, either when the obligation matures or on the date you dispose of the obligation.

Enter the total amount of gain or loss realized on disposition of bonds at amount C.

Reference
IT-479, Transactions in Securities

Part 4 - Other properties

In this part, describe any capital property disposed of during the tax year that you have not already reported in Parts 1, 2, and 3.

Other property includes capital debts established as bad debts, debts in respect of the disposition of personal-use property established as bad debts, amounts that arise from foreign currency transactions, as well as capital gains or losses allocated from partnerships and trusts.

When an amount receivable on a capital account becomes a bad debt and you elect on your return to have the provisions of subsection 50(1) applied, a deemed disposition occurs at the end of the year. You are considered to have reacquired the debt immediately afterwards at a cost of nil. This usually allows the corporation to claim a bad debt as a capital loss in the year. Any later recovery of that debt will result in a capital gain.

References
Subsection 50(1)
IT-159, Capital Debts Established to be Bad Debts

You can deduct, per subsection 50(2), capital losses in respect of bad debts relating to the disposition of personal-use property to a person with whom you deal at arm's length.

The amount of the loss cannot be more than the amount of the gain reported on the disposition of the personal-use property.

Reference
Subsection 50(2)

Foreign exchange gains or losses from buying or selling capital properties are capital gains or capital losses.

Transactions in foreign currency or foreign currency futures that do not form part of the business operations can be considered capital dispositions.

References
Subsection 39(2)
IT-95, Foreign Exchange Gains and Losses

For dispositions of depreciable property, a capital gain results if the proceeds are more than the capital cost. However, losses on depreciable property do not result in capital losses. These losses are terminal losses. See "Column 10 - UCC" (undepreciated capital cost) on page 51 to find out more about terminal losses.

Enter the total amount of gain or loss realized on disposition of other properties at amount D.

Part 5 - Personal-use property

In this part, describe any personal-use property you disposed of during the tax year.

Personal-use property of a corporation is property owned mainly for the personal use or enjoyment of an individual who is related to the corporation.

Use the $1,000 rule to determine gains and losses when you dispose of personal-use property. According to this rule, if the adjusted cost base is less than $1,000, it is considered to be $1,000. As well, when the proceeds of disposition are less than $1,000, they are considered to be $1,000.

The $1,000 rule will not apply when donors acquire personal-use property as part of an arrangement in which the property is gifted to a qualified donee, such as a registered charity.

You cannot deduct losses on dispositions of personal-use property (other than listed personal property or a debt that is personal-use property) from your income.

Enter the total amount of gain realized on disposition of personal-use property at amount E.

Reference
Subsection 46(1)

Part 6 - Listed personal property

In this part, describe any listed personal property disposed of during the tax year.

Listed personal property is a special category of personal-use property that usually increases in value. The following is a complete list of the different types of listed personal property:

If you incur losses from disposing of listed personal property, you can only deduct these losses from capital gains realized from disposing of listed personal property.

On line 655, enter the amount of listed personal property losses from previous years you want to apply against current-year net listed personal property gains. Also, enter this amount on line 530 of Schedule 4, Corporation Loss Continuity and Application.

You can apply any unabsorbed losses in the current year to reduce similar net gains realized in the three preceding years, and in the following seven years. See "Part 5 - Listed personal property losses" on page 68 for more details.

At amount F, enter the total amount of gains or losses realized on disposition of listed personal property minus the amount of line 655.

Part 7 - Property qualifying for and resulting in an allowable business investment loss

Generally, a business investment loss arises from the arm's length disposition (or deemed disposition) of:

A small business corporation is defined in subsection 248(1).

Complete Part 7 to calculate the business investment losses at amount G.

Capital gains reserve

Often, you will not receive part of the proceeds of disposition, usually for real property, until after the end of the year. In these cases, you can defer part of the capital gain to the year the corporation is due to receive the proceeds by setting up a capital gains reserve. By using reserves, you can spread a capital gain over a maximum of five years.

Generally, a corporation that has made a gift of a non-qualifying security to a qualified donee may claim a reserve for any gain realized on this security. The reserve claimed by the corporation cannot exceed the eligible amount of the gift. The eligible amount of a gift is the amount by which the fair market value of the property that is the subject of the gift exceeds the amount of the advantage, if any, in respect of the gift.

A reserve can only be claimed if the donation is not deducted for tax purposes and the donee does not dispose of the security or the security does not cease to be a non-qualifying security. This reserve can only be claimed in tax years ending within 60 months of making the gift.

The reserve must be included in income if the corporation becomes a non-resident or tax exempt.

The reserve that you can claim in a tax year cannot be more than the lesser of the following two amounts:

Add the reserve amount you deducted in a tax year to income in the following tax year.

Add the reserve opening balance and subtract the reserve closing balance on lines 880 and 885 of Schedule 6.

Show the continuity of capital gain reserves on Schedule 13, Continuity of Reserves. See page 64 for details.

References
Subparagraphs 40(1)(a)(ii) and 40(1)(a)(iii)
Subsection 40(1.01)

Part 8 - Capital gains or losses

When completing this part, line 875 is the capital gains dividends. Capital gains dividends under paragraphs 130.1(4)(a) and (b) and 131(1)(a) and (b) are considered to be capital gains. These paragraphs apply to mortgage investment corporations and mutual fund corporations. If you received any capital gains dividends in the tax year, enter them on this line.

Line 880 is the balance at the beginning of the year of the capital gains reserve from Schedule 13. This amount should include any amount from the last tax year of predecessor corporations after amalgamation or wind-up.

Part 9 - Taxable capital gains and total capital losses

Generally, a zero inclusion rate applies for capital gains arising as a result of a gift to qualified donees of certain securities or of environmentally sensitive land. The zero inclusion rate is restricted to only part of the capital gain if the taxpayer is entitled to an advantage or benefit in respect of a gift.

When completing this part, line 895 is the full amount of capital gains realized on donations of a security listed on a designated stock exchange, a share or unit of a mutual fund, an interest in a segregated fund, or a prescribed debt obligation made to a qualified donee.

Generally, if you donate property to a qualified donee that is included in a flow-through share class of property, and you have an exemption threshold for the flow-through share class of property, you may be deemed to have an additional capital gain from the disposition of another capital property subject to the 50% inclusion rate.

Amounts under section 34.2 (the adjusted stub period accrual regime) that have the character of capital are to be entered in this part of Schedule 6 and not on line 130 of Schedule 1.

Since these amounts are deemed to be taxable capital gains/allowable capital losses under the rules in section 34.2 and so already reflect the 50% inclusion rate, they are multiplied by 2 on Schedule 6 to calculate the total capital gains or losses of the corporation.

In general, if you dispose of an interest in a partnership to tax-exempt entities, non-resident persons, or partnerships and trusts that have such members or beneficiaries, a special rule may apply.

Under subsection 100(1), part of the capital gain may be subject to the 50% inclusion rate and another part may be subject to a 100% inclusion rate.

The portion of the capital gain that can reasonably be attributed to increases in the value of capital property (other than depreciable property) held directly by the partnership (or held indirectly by the partnership through one or more other partnerships) is subject to the 50% inclusion rate and the rest is subject to the 100% inclusion rate.

If all the partnership assets are inventory, depreciable property, or resource property, then the capital gain would be subject to the 100% inclusion rate unless an exception applies. If there is also capital property (other than depreciable property), then it's an apportionment.

If subsection 100(1) applies, enter the result of the portion of the capital gain that is subject to the 100% inclusion rate multiplied by 2 on line 902. Enter the portion of the capital gain that is subject to the 50% inclusion rate in Part 4.

Amount P is the capital gain or loss for the year. If the amount is a loss, enter it at amount Q of Schedule 6 and line 210 of Schedule 4. If the amount is a gain, enter the result of amount P multiplied by 1/2 at amount R of Schedule 6 and line 113 of Schedule 1.

References
Subsections 40(12) and 100(1)
Paragraphs 38(a.1) and 38(a.2)

You can deduct an ABIL from all sources of income for the year. If any balance remains after the year the loss occurs, it becomes part of the non-capital loss. You can carry the non-capital loss back 3 tax years and carry it forward 10 tax years.

If you are unable to deduct an ABIL as a non-capital loss within this allowed time frame, the unused part becomes a net capital loss, and you can carry it forward indefinitely to reduce taxable capital gains.

Include all unused ABIL after the applicable carry-forward period in Part 2, "Capital losses", of Schedule 4. See page 67, for more details.

References
Paragraph 39(1)(c)
S4-F8-C1, Business Investment Losses

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