5.4 Schedule D - Carry-Back of a Loss

The trust may have sustained, in a taxation year, one or several types of losses, including:

• a non-capital loss;

• a farm loss or a fishing loss;

• a net capital loss;

• a net loss on precious property;

• a restricted farm loss.

The losses listed above can be carried back three years and forward a certain number of years, depending on the type of loss. At the end of the tenth year that follows the year in which the trust sustained a business investment loss (line 511), the amount of that loss or the unused portion of a non-capital loss, whichever is less, will become a net capital loss at that time.

Schedule D must be completed in order to carry a loss back to a previous year; it must be filed with the trust income tax return. You can also use Schedule D to determine the trust's non-capital loss for the year concerned.

In the upper right-hand corner of the schedule, you must enter the end date of the taxation year in which the loss was sustained ("taxation year concerned"). You can use Schedule D to carry back a loss sustained in 2023 or 2024. Make sure you enter the end date(s) of the taxation year(s) to which the loss is being carried (one or more of the three previous taxation years).

The carry-back of a non-capital loss has no incidence in the year to which the loss is carried (year of the carry-back) with respect to the amounts already allocated to the beneficiaries.

However, the carry-back of a net capital loss may have the following consequences in the year of the carry-back:

• The carry-back of the loss reduces the taxable capital gains of the trust. The result obtained constitutes taxable capital gains that could be designated, up to the amount on line 80 of the return. If the result (amount from line 250 of Schedule A that you amended to take into account the carry-back of the loss) is less than the amount of taxable capital gains already designated (line 250 of Schedule A before the carry-back of the loss), you must file an amended Schedule C and amended RL-16 slips to reduce the taxable capital gains designated. You must ensure that the total income allocated to the beneficiaries remains unchanged.

• The carry-back of the loss may increase the amount on line 355 (other adjustment of investment expenses) of Schedule B for that year, because it must be entered on line 338 of that schedule.

• The carry-back of the loss may create or increase a non-capital loss for that year.

The income tax refund resulting from the carry-back of a loss may be applied to the payment of an amount owed for another taxation year.

A net capital loss on precious property can be used only to reduce a capital gain realized on other precious property. Similarly, a restricted farm loss that is carried over to a given year can be used only to reduce farm income for that year. In all cases, the loss must be carried back in accordance with sections 727 to 737 of the Taxation Act or, in the case of precious property, in accordance with sections 265 to 269.

In this schedule and in its instructions, the term "beneficiary" means any person to whom the trust must allocate income or a taxable capital gain. This person can be a beneficiary that holds an interest in the trust, a transferor to which the income attribution rule applies or the electing contributor of a deemed resident trust.

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