Tax update: That mysterious T3, Schedule 12, line 30 Minimum Tax adjustment

This blog hopes to alleviate the confusion over line 30 of a trust’s minimum tax (“AMT”) calculation on schedule 12 and its companion line 42 of an individual’s form T691. The confusion is understandable given the convoluted wording of ITA 127.52(1)(i)(ii)(B) and the absence of any meaningful guidance from Finance or the Canada Revenue Agency on how this provision operates.

A line 30 adjustment arises if prior year net capital losses (“NCLs”) deducted in the current year for regular tax purposes exceed prior year NCLs available for AMT purposes. The following example illustrates a line 30 adjustment:

1. Year 2010. Capital loss of $100. For regular income tax, the NCL carry forward is $50. For AMT purposes under 127.52(1)(i)(ii)(B)(II) and 127.52(1)(d)(i) as it read in 2010, the AMT NCL carry forward is $80.
2. Year 2013. Capital gain of $70. For regular income tax, taxable capital gain is $35, NCL carry forward deduction is $35 and unused NCL is $15. For AMT purposes, taxable capital gain under 127.52(1)(i)(ii)(B)(III) and 127.52(1)(d)(i) as it reads today is $70, NCL carry forward deduction is $70 and unused NCL for AMT purposes is $10.
3. Year 2025. Capital gain of $30. For regular income tax, taxable capital gain is $15 and NCL carry forward deduction is $15. For AMT purposes, taxable capital gain under 127.52(1)(d)(i) is $30 and NCL carry forward deduction is $10.

The post-2011/pre-2012 AMT rate differential is the result of the words “as they read” in subclause (II) which do not appear in subclause (III). This is why, in the example, the 2010 AMT loss is calculated using the rate in effect in 2010 of 80 per cent, but the 2013 AMT gain must be calculated using today’s 100 per cent rate.

In this scenario, the trust would enter a $5 adjustment on line 30.

Glen MacMillan, Tax Partner

Please contact your Adams + Miles partner if you have any questions about minimum tax or any other matters.

The above content is not complete, does not address all scenarios and is intended for general information purposes only. This memo should not be used or relied on as a substitute for consultation with your Adams & Miles professional advisor.