# How to calculate after-tax return if investor can use capital loss, in Canada?

[Source:] As you can see in the table, the \$105,000 government bond matures at \$100,000, for a capital loss of \$5,000. The investor would also collect interest totalling \$9,660 over the three years (\$100,000 x 0.0322 x 3). But here’s the thing: Even though the capital loss takes a big bite out of the investor’s return, the entire \$9,660 in interest payments is taxable at the investor’s marginal rate (which is assumed here to be 46.41%).

The tax hit works out to \$4,483. If you subtract that amount, and the \$5,000 capital loss, from the \$9,660, in interest the investor is left with an after-tax return of just \$177. True, he could theoretically use the capital loss to offset other capital gains – assuming he has them – but that would only boost the net return to \$1,337, which is still pretty lousy. True, he could theoretically use the capital loss to offset other capital gains – assuming he has them – but that would only boost the net return to \$1,337, which is still pretty lousy. To calculate the after-tax return with the use of \$5,000 capital loss, why perform the arithmetic coloured in orange above? To wit, why multiply \$5000 x 50% x 46.41%?
I know that the article assumes 46.41% as the investor's marginal tax rate.
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