Exempt capital gains balance (ECGB)

When you filed Form T664 for your shares of, or interest in, a flow-through entity, the elected capital gain you reported created an ECGB for that entity.  

Note

Generally, your ECGB expired after 2004. If you did not use all of your ECGB by the end of 2004, you can only add the unused balance to the adjusted cost base of your shares of, or interest in, the flow-through entity.

For 2004 and previous tax years, if you received property from a trust in satisfaction of all or a part of your interest in the trust (a flow-through entity described in items 7 to 10 of What is a flow-through entity?), you could elect to use the ECGB for the entity to increase the cost of property you received from the trust. Since 2005, the election is no longer necessary because any unused ECGB can only be added to the cost of your interest in the flow-through entity.

Example

Andrew filed Form T664 for his 800 units in a mutual fund trust with his 1994 income tax and benefit return. He designated the fair market value of the units at the end of February 22, 1994, as his proceeds of disposition. Andrew claimed capital gains reductions of $500 in 1997 and $600 in 1998. At the end of 2003, his exempt capital gains balance was $2,250. In 2004, he had a $935 capital gain from the sale of 300 units. This left him with an unused balance of $1,315 at the end of 2004. In 2005 and future years, he can only add the unused ECGB to the cost of any remaining units (see following chart).

1. ECGB carryforward to 2004

 
 
$2,250
Line 1

2. Capital gains flowed out

$ Blank space for dollar value
Line 2

3. Capital gains from dispositions

+ $935
Line 3

4. Line 2 plus line 3

= $935
Line 4

5. Capital gains reduction

 
 
− $935
Line 5

6. Unused ECGB at the end of 2004 (line 1 minus line 5)

 
 
= $1,315
Line 6

The unused ECGB expired after 2004 so Andrew can add this amount to the adjusted cost base of his shares of, or interest in, the flow-through entity.

For information on the sale of this kind of property, see Disposing of your shares of, or interest in, a flow-through entity.

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