Overview of the stop-loss rules

The basic ordering rules of the Income Tax Act (ITA) permit taxpayers to use losses from business or property to offset income from all sources, and allowable capital losses to offset taxable capital gains. This ability to reduce income and taxes by using losses creates an incentive for taxpayers to acquire someone else’s losses, accelerate the recognition of losses, or enter into artificial transactions to create losses. The ITA contains numerous rules that deny or restrict the availability of losses in certain circumstances. These rules are referred to as “stop-loss” rules.

In this course, developed for the In-Depth Tax Program, you will gain a comprehensive understanding of the ITA’s common stop-loss rules as well as their implications and exceptions, inadequate consideration, non-arm’s length transfers and the interaction between attribution rules and stop-loss rules. Finally, you will work on a case study, requiring you to apply this foundational knowledge.

This course consists of four separate modules which highlight key concepts and critical tax compliance issues integrating eLearning modules with knowledge checks and scenario activities designed for you to complete at your own pace and revisit when necessary.

This course is based upon enacted Canadian income tax legislation as of March 31, 2021.

• identifying common superficial stop-loss rules in the Income Tax Act (ITA), and determine their tax implications
• defining identical properties
• finding, identifying, and applying the affiliated persons definition sections of the ITA to directed fact scenarios to determine where they apply
• determining the tax implications resulting from common superficial stop-loss rules
• identifying the common exceptions to the superficial loss rules
• assessing when a superficial loss exists, using a non-directed fact scenario
• identifying common suspended stop-loss rules in the ITA
• defining identical properties with regard to superficial and suspended losses
• determining the tax implications resulting from common suspended stop-loss rules
• identifying the common exceptions to the suspended loss rules
• assessing when a suspended loss exists, using a non-directed fact scenario
• differentiating between the tax implications of the superficial and suspended loss rules
• applying the ITA rules related to non-arm’s length transfers and inadequate consideration
• differentiating between arm’s length and non-arm’s length transactions
• identifying when inadequate provision applies to non-arm’s length transactions
• determining the current and future tax implications resulting from inadequate consideration
• recognizing the exceptions where taxpayers may transact at amounts other than fair market value
• explaining the interaction between the attribution rules and the stop-loss rules