Can an estate's investment loss reduce tax on the final return?

Arsen Accounting Services · Question 194 · Sources checked October 29, 2026

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A qualifying graduated rate estate may elect under subsection 164(6) to treat certain estate losses as losses of the deceased person on the final return. This can be important when assets decline after the deemed disposition at death.

Check the current eligibility window

CRA's current guidance distinguishes estates where the date of death is after August 11, 2024: qualifying losses from the first three estate taxation years may be eligible. For earlier deaths, the first-year framework is relevant. Other conditions, loss restrictions, and election requirements still apply.

The election does not simply transfer the loss to every prior year or to beneficiaries. It coordinates the estate's return and the deceased person's final return, and requires the prescribed filing steps.

Official guidance: [1], [2].

Review before the estate year closes

For example, shares included at a higher value on death are later sold by the estate at a loss. Compare the estate sale records with the date-of-death valuation and identify whether the estate qualifies for the election. A paper decline without a relevant disposition does not establish the same claim.

Gather the election records

• Date of death and estate taxation-year ends.
• Evidence of graduated-rate-estate status.
• Asset values, costs, sales, and loss calculations.
• Final T1 and estate T3 returns and assessments.

Ask your preparer to confirm the election deadline, loss-denial issues, and amendment process before filing. Keep proof of the election and a reconciliation showing where the loss was used. Do not rely on an older guide that assumes every estate has only a single first-year opportunity without checking the applicable death date.