The check box in column A of Part 1, “Capital gains reserves” is used to identify reserves for capital gains arising from the disposition of a property other than an active asset (as defined under subsection 125(7) ITA). When the check box is selected, the difference between the balance at the start of the year and the balance at the end of the year is added to line 1.2, Eligible portion of capital gains reserves (addition/deduction) of column C, Adjusted aggregate investment income in Part 3A, “Canadian and foreign investment income and adjusted aggregate investment income calculations,” of Schedule 7, Aggregate Investment Income and Income Eligible for the Small Business Deduction (Jump Code: 7). For more information on the definition of active asset and the calculation of the adjusted aggregate investment income, consult the help topics for Schedule 6 and Schedule 7.
The check box located in the column Description of Part 2, “Other reserves,” is used to indicate reserves that are deductible for tax purposes and that have already been included in net income per financial statements. When the check box is selected, the program displays offsetting entries in Schedule 1, Net Income (Loss) for Income Tax Purposes (Jump Code: 1). Therefore, there is no effect on the reconciliation between net income per financial statements and net income for tax purposes.
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