# Reinvested MF distributions & superficial loss rule



## mrPPincer (Nov 21, 2011)

Ok, I'm assuming reinvested distributions in a mutual fund will change a capital loss into a superficial loss, but it doesn't seem fair.

In my example say I sold some units of a particular td e-fund within a taxable acct. during the month of december and it turned out to be at a price below my adjusted cost base.
Then, dec. 19th this same fund payed out distributions which were reinvested automatically.

I'm guessing no, but would this be an exception to the superficial loss rule?
If not and it was a superficial loss I'll have to figure out how to add the loss to my ACB which seems like a pain.
(I always dread doing my taxes but I guess it's never been as bad as I imagined it would be once I do get rolling on them)

Thanks in advance for any help here.


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## stardancer (Apr 26, 2009)

If you sold some units of a mutual fund, but still kept other units, any loss would be a superficial loss and would get calculated into the ACB, whether the fund paid distributions or not. This is because you still own some of the fund. See: 
http://www.cra-arc.gc.ca/tx/ndvdls/.../lns101-170/127/lss-ddct/sprfcl/menu-eng.html

Note: you still have to report a capital gain even if you still own the fund.

If you sold all the units of a mutual fund, you would get no distributions because you would have no more interest in the fund. You would then only have a superficial loss if you had purchased units 30 days before through 30 days after the sale.

If you received a distribution and then sold all the units of the fund within the 30 day limit, it would not be a superficial loss. A distribution is not a sale or a purchase, even though you have to calculate the drip into the ACB.


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## mrPPincer (Nov 21, 2011)

Thanks for the reply stardancer, you are partly right, but
it seems for it to be a superficial loss you have to actually purchase 30 days before or after selling, *as well as* be holding the funds 30 days after the sale; simply still owning shares is not enough alone to cause it to be a superficial loss.

irt my question re auto-reinvested distributions, I just got off the phone with a CRA rep who informed me that a reinvested distribution is exactly the same as a manual purchase when determining superficial losses, so I've instructed my e-series funds to pay distributions in cash from now on, just to be on the safe side in the future.

I think I'd rather make my own choices as to where & when I reinvest anyways.


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