# Tax Loss Selling



## 50invester (Feb 10, 2010)

A question on selling a security to produce a capitol loss. As I understand it, in order to claim a capitol loss on the selling of a stock, fund, etc., you must neither have purchased the stock 30 days prior or 30 days after selling it. Is this correct? Some other quetsions:

1. If you have alot of the stock, can you just sell some of it or must you sell all of it. 

2. Is there some cut-off date near the end of the year to sell or can I still do this? 

3. Are Registered and Non-Registered accounts treated seperately. In other words, if I sold some stock in my margin account and then bought it back right away in my RRSP account, would that work or not? I'm thinking it wouldn't.

Any advise would be appreciated. Thanks.


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## CanadianCapitalist (Mar 31, 2009)

50invester said:


> A question on selling a security to produce a capitol loss. As I understand it, in order to claim a capitol loss on the selling of a stock, fund, etc., you must neither have purchased the stock 30 days prior or 30 days after selling it. Is this correct? Some other quetsions:
> 
> 1. If you have alot of the stock, can you just sell some of it or must you sell all of it.
> 
> ...


I'm not a tax expert, so consider this as the first step in your own DD.

1. You can sell a portion of the stocks you hold. Note that the capital loss has to be computed on your ACB.

2. December 24th is the cut off date.

3. You can't sell a security and purchase it within a RRSP. You may sell a stock for tax-loss purposes and buy a similar security (Example would be selling TD and buying RY).

http://www.cra-arc.gc.ca/tx/ndvdls/...tng-ncm/lns101-170/127/clc-rprt/menu-eng.html


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## 50invester (Feb 10, 2010)

Thanks very much for the info. 'ACB' ??: )


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## boycapitalist (Feb 11, 2010)

50invester said:


> Thanks very much for the info. 'ACB' ??: )


Adjusted Cost Base. 


Average ACB/unit = (initial investment + additional contributions + reinvested distributions - amount of any previous redemptions) / total number of units currently held

http://en.wikipedia.org/wiki/Adjusted_Cost_Base


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## DavidJD (Sep 27, 2009)

Can anyone clarify this for me...

I have a margin/trading account and sell some units for a loss before the 24th of December.

I buy back on the 29th of December the same number of units in my TFSA. Does this make a difference? A different account?

What if it is bought in my wife's TFSA? Or RRSP?

I am curious about the specifics about buying units back (within the 30 days after a sale to trigger a loss) in another account.


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## atrp2biz (Sep 22, 2010)

This is a guideline on superficial losses.

http://www.cra-arc.gc.ca/tx/ndvdls/.../lns101-170/127/lss-ddct/sprfcl/menu-eng.html


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## cardhu (May 26, 2009)

50invester said:


> As I understand it, in order to claim a capitol loss on the selling of a stock, fund, etc., you must neither have purchased the stock 30 days prior or 30 days after selling it. Is this correct?


Not exactly … in some cases, you can still claim a loss despite having purchased the stock in the 30 days prior to a sale. There are two tests to determine whether a loss is “superficial”, and BOTH tests must be met, in order for the rule to apply … if either test fails, then the loss is NOT superficial. 

The first test is the one you described … if you made a purchase of the identical property within 30 days before or after the sale that produced the loss. 
The second test is whether you still (or again) own the “replacement” property within 30 days after the sale.


ACB … The formulas provided by Wikipedia (one of which is shown above) are wrong … the “amount of any previous redemptions (sales)” is never part of the calculation … only the fraction of your redemption (sale) amount that represents the ACB, is included.


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## Eclectic12 (Oct 20, 2010)

DavidJD said:


> Can anyone clarify this for me...
> 
> I have a margin/trading account and sell some units for a loss before the 24th of December.
> 
> ...


The notes I've read say that non-registered to RRSP is a no-no. I suspect the analysis systems that would catch this are less developed for the TFSA, but the principle seems to be that the account doesn't matter.

This link says the spouse/common-law or company you control are also no-nos.

http://www.invescotrimark.com/publi...mmon/library/PDF/tax_planning/TECALP//eBinary


So I'm with CanadianCapitalist, sell RY and buy a similar replacement like BMO, if you can find one you are happy with. Otherwise, cross your fingers and wait the thirty days.

Hmmm ... I wonder how Canada Revenue Agency (CRA) would treat a purchase of options, sell the stock and use the options after thirty days?


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## OntFA (May 19, 2009)

cardhu said:


> Not exactly … in some cases, you can still claim a loss despite having purchased the stock in the 30 days prior to a sale. There are two tests to determine whether a loss is “superficial”, and BOTH tests must be met, in order for the rule to apply … if either test fails, then the loss is NOT superficial.
> 
> The first test is the one you described … if you made a purchase of the identical property within 30 days before or after the sale that produced the loss.
> The second test is whether you still (or again) own the “replacement” property within 30 days after the sale.


This is also my understanding. You cannot have made a purchase over that 61-day period AND you cannot own - outright or via options/derivatives - the security or property identical to the security. The law is worded such that both conditions must be met to treat losses as superficial. CRA has no motivation to go out of its way to clarify this since the common understanding of it is in their favour.



cardhu said:


> ACB … The formulas provided by Wikipedia (one of which is shown above) are wrong … the “amount of any previous redemptions (sales)” is never part of the calculation … only the fraction of your redemption (sale) amount that represents the ACB, is included.


I didn't follow the wiki link but ACB is an average acquisition cost so it isn't affected by redemptions. The only exception is when calculating total ACB, in which case redemptions reduce your total ACB but have no impact no per-unit or per-share calculations.



Eclectic12 said:


> Hmmm ... I wonder how Canada Revenue Agency (CRA) would treat a purchase of options, sell the stock and use the options after thirty days?


Not gonna work...CRA is way ahead of you...



Section 54 of the Income Tax Act said:


> “*superficial loss*” of a taxpayer means the taxpayer’s loss from the disposition of a particular property where
> 
> (a) during the period that begins 30 days before and ends 30 days after the disposition, the taxpayer or a person affiliated with the taxpayer acquires a property (in this definition referred to as the “substituted property”) that is, or is identical to, the particular property, and
> 
> ...


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## cardhu (May 26, 2009)

OntFA said:


> I didn't follow the wiki link but ACB is an average acquisition cost so it isn't affected by redemptions. The only exception is when calculating total ACB ...


... which is exactly what Wikipedia did ... then they took that incorrect total ACB and divided it by the number of units remaining following a redemption, to arrive at an incorrect per-unit ACB ... basically, they botched the entire article.

I don’t like the total-ACB method ... too prone to exactly the kind of error Wiki makes ... I use a per-share ACB in all of my records ...its easier to calculate, and as you mentioned, sales or redemptions have no effect.


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## Eclectic12 (Oct 20, 2010)

cardhu said:


> ... which is exactly what Wikipedia did ... then they took that incorrect total ACB and divided it by the number of units remaining following a redemption, to arrive at an incorrect per-unit ACB ... basically, they botched the entire article.
> 
> I don’t like the total-ACB method ... too prone to exactly the kind of error Wiki makes ... I use a per-share ACB in all of my records ...its easier to calculate, and as you mentioned, sales or redemptions have no effect.


This is the bone I have to pick with Canada Revenue Agency (CRA). Just about all of the articles and sample calculations for ACB use the per-share ACB. Then on the tax forms, CRA uses total ACB instead, with a heading of "ACB". 

It always messes me up .... *grrrhhh* - why didn't they use a different label?


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## Skye (Sep 3, 2011)

How would superficial loss in this scenario. Sell 100 shares of ACME CO. in trading account. Buy 100 shares in ACME in Registered Account. Buy 100 Shares in trading account. All this occurs in the 61 day window but on different days. Can I take the superfical loss and add it to my ACB in trading account? Do I need to prorate the loss between the trading and registered accounts? Is the 200 shares purchased all considered substituted property?? Thanks for any reply. Lots of info on superficial losses but nothing seems to answer these questions. Thanks.


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## cardhu (May 26, 2009)

Skye said:


> Is the 200 shares purchased all considered substituted property??


No … only 100 shares were substituted, since you only sold 100. 

As for which 100 shares? I don’t know if sequence of transactions has any bearing in such a case, but in that situation I would apply the superficial loss entirely to the non-reg purchase, and adjust its ACB accordingly.


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