Using capital losses?
I sold some FB for a loss (shocker...)
Anyways, this is the first stock I've sold for a loss. As I understand it, I can actually use it to offset gains?
I really have no idea how it works so an explanation would be greatly appreciated
Would it only be offset against capital gains? Or can it work for dividend income, etc.?
First stock to sell @ a loss, I wish I could say that, but then again in the market wizard book I think every or close to every trader/investor got wipped out once to a few times before they were able to beat the odds & make money long term in the market. Be carefull you might have to pay your tuition. If @ some point the market falls far below the 2009 lows those that have had a lot of thier money on the table are they still going to want to play the game ?
Only if it is not in regestered account (TFSA , RRSP are registered) ( dont know about accounts set up for sending kids to school)
Last edited by CanadianCapitalist; 2012-06-07 at 11:34 AM.
Reason: Edited out incorrect information
If for the year you have a net-capital loss, you can carry back the loss to offset capital gains in the last 3 years, or you can carryforward indefinitely. The most likely scenario is that your capital loss on this particular stock will be used to offset other capital gains in the current year. This is done on Schedule 3 of your T1. This is of course, assuming that this loss occurred in a non-registered account. If this loss took place in your RRSP or TFSA, it is essentially trapped.
If you are familiar with the process to report selling a stock at a gain, then you already know most of what happens for a loss.
Originally Posted by Kaitlyn
Use the T1 - Schedule 3 form to report # shares sold, corporation name, acquisition year, proceeds, ACB and expenses. The difference is that instead of a positive gain, you will have a negative loss.
If there are other gains that equal of exceed the loss, everything is done.
For example, sell stock A for +$200 CG and sell FB for -$150 CL, the net is a +$50 CG, which on schedule 3 line 199 is further reduced by 50% to be a Taxable CG of +$25 and transferred to line 127 "taxable capital gains" of your return. There is nothing for future or past years to do.
On the other hand, if the other gains are less than the loss, then the loss amount can be carried forward or applied up to three tax years back.
Using the same example, different amounts, sell stock A for $100 CG and sell FB for -$150 CL, the net is a CL of -$50, which on schedule 3 line 199 is further reduced by 50% to a Taxable CL of -$25. Now there is a choice:
a) to fill out a T1A "Request for Loss Carryback" to reduce a CG from say, the 2011 tax year. (For a tax year 2012, the earliest CL carry back is tax year 2009).
b) keep the $25 CL and apply it to a future tax year. For this choice, I like to keep my own notes as it is easy to miss the line item on the Notice of Assessment (NOA) or forget that the CL is available for use.
So hopefully it is clear that a CL is only useful to reduce a CG. Similarly, since there is no CG in an RRSP or TFSA, this only applies to a taxable account.
Here's a CRA link that might help: