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I purchased a GIF 10 years ago, that just matured in 2009. I invested X amount of dollars and the investment bank loaned me 2X dollars; I paid the interest on their loan with dreams of growth exceeding interest payments. That didn't work out as planned.

The fund tanked but at the end of the day I got my investment back so all was not lost. Right? Then I received my T3 and found that the "guaranteed top up" to get me back to X dollars plus the bank back to 2X dollars counted as capital gains! The amount is substantial, more than my original investment.

Is this possible? How can I be expected to pay capital gains on their loss? I do not see a gain, only my original investment given back to me.

So what do I do on income taxes? My investment adviser said to report this amount as both capital gains and capital losses. However I do also have a capital loss reported on my T3 (box 37).

Please help!
 

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Are you sure they reported it as a capital gain. and not return of capital?

2nd thought: the capital gains on T3 may be for the capital gains generated inside the fund when they sold assets to pay you the distribution they owed you. This is reported on Line 176 of Schedule 3. The Capital loss shown on your T3 may be your loss due to your purchase or sale transactions of units of the fund. Ordinarily you have to keep track of this yourself, and report it in Part 3 of Schedule 3, but perhaps they have saved you the trouble of calculating it and included it on your T3. Does it match what you think it should be?. This may be what your investment advisor meant.

3rd thought: ask the issuing financial institution for an explanation.

PS: note if you are trying to calculate your own ACB: if part of your distributions in the past have been "Return of Capital", that affects your ACB. Distributions of Interest, Dividends, Capital Gains, and "Other Income", if paid out to you in cash, do not affect ACB.
Re-invested distributions affect ACB, because they constitute share purchases.
 

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Discussion Starter #3
The two boxes reporting on my T3 are Box 21 Capital Gains and Box 37 Insurance segregated fund net capital losses. The information on the form tells me to report both of these values on line 176.

The capital gains amount was generated by a new fund that the bank purchased to bring the value back up to the original amount of the investment (3X). When they took back their 2X amount they left me holding the bag for the full top-up.

Going back over yearly statements it does not appear that there were any transactions to the 3 funds in the portfolio. In other words it was most likely mismanaged. I have only ever reported on capital losses.
 

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Capital Gains & GIF

Hello:
I'm in the same situation with Manulife. I received a T3 with a capital gain in the same amount as my top up. I phoned Revenue Canada to inquire how a top up (return of capital) could be considered a capital gain. If the information I received is accurate, Rev. Can. made a ruling saying the top up can be listed as a capital gain. I have asked for this ruling and supposedly they are going to send it to me. The Rev. Can. number to the Advanced Income Tax Ruling Dept. is 613-957-8953. The Ruling numbers are 9817165 and 9905255. To say the top up is a capital gain is ridiculous. I haven't received the written rulings yet to see the actual wording.
 
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