Such lump-sum payments often reflect compensation for services rendered over several years.The fact that it is received in a single year can result in significant portions of it being taxed at rates higher than would have been applicable had it been received over the several years during which it was earned.The deduction of such amounts provides the basis for an alternative Tax Payable calculation which attempts to adjust the amount paid to the amount that would have been paid if the amount had been received over several years.The objective of such provisions is fairness or equity.
The carry forward periods for the various types of losses identified in the Income Tax Act and covered in the text up to Chapter 11 are as follows: • Non-Capital Losses and Farm Losses: 20 years. • Net Capital Loss: Unlimited. • Listed Personal Property Losses: 7 years. • Allowable Business Investment Losses: 10 years, then converted to net capital loss with unlimited carry forward. Covered in Chapter 18 are limited partnership losses.They have no carry back and an unlimited carry forward, but only against the partnership income to which they relate.
There are two reasons for having to track each type of loss carry forward separately.First, different types of losses have different carry forward periods (e.g., 20 years for farm losses vs.unlimited for capital losses).Second, some types of losses can only be applied against the equivalent type of income (e.g., capital losses can only be carried over and applied against capital gains).