Overview of the stop-loss rules

Developed for the In-Depth Tax Program, this course provides practitioners a comprehensive understanding of the Income Tax Act (ITA)’s common stop-loss rules, including implications of inadequate consideration, and non-arm’s length transfers.

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