If the loss is apparently from a business or property, the issue is not always straightforward because of the source issue.
At one time, the CRA and the courts took the position that you could have a loss from a business or property source only if you had a reasonable expectation of profit (“REOP”). If you did not have an REOP you did not have a source and your loss could not be used for tax purposes.
Fortunately, the Supreme Court of Canada clarified the source rules in the landmark Stewart case, back in 2002.
According to the Supreme Court, the source rules are as follows: