Investment expenses, such as carrying charges and management fees, paid to earn investment income can be deducted, even if no income is earned from those investments in a specific year.
If the cumulative investment expenses you claim exceed the cumulative investment income you report at any time, the excess will reduce the amount of capital gains exemption you have available. A 50% capital gains inclusion rate makes this less of an issue as you can use your investment expenses to reduce your employment or business income.
Employment and business income is taxed at an inclusion rate of 100%, but the capital gains exemption is only reduced by 50% of the excess.
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