Cumulative net investment loss (CNIL)

A seller who plans to claim the capital gains deduction should check their CNIL if they have deducted investment expenses over the years. Section 110.6(1) of the Income Tax Act defines an individual’s CNIL at the end of a year as the amount, if any, by which the total of their investment expenses for that year and earlier years ending after 1987 (less certain portions the definition excludes) exceeds the total of their investment income for the same years.

Why it matters

The Act subtracts the CNIL, among other amounts, in working out the individual’s cumulative gains limit, and the deductions under subsections 110.6(2) and (2.1) are each capped by reference to that limit, among other amounts. The CRA’s T4037 guide says that if you claim the capital gains deduction and have investment income or investment expenses in any year from 1988, you must also complete Form T936, and that the CNIL is a component of the deduction. The deduction itself is calculated on Form T657.

What to ask

• Which investment expenses did the seller deduct, and in which years?
• Has the seller’s accountant completed Form T936?
• How does the result flow into Form T657?

See the lifetime capital gains exemption and the guide on claiming the exemption on your tax return.