# Help with superficial loss rule, is it?



## Justin1980 (Feb 23, 2013)

Suppose the following scenario:


Today's date is Nov 11th.
Commission is $5 on every buy and sell.


On August 2nd, *I BOUGHT* 100 shares of ABC @ $10 each (+$5 commission). ACB = $10.05

On November 3rd, *I BOUGHT* 50 more shares @ $9 each (+$5 commission). ACB = $9.70

On November 10th, *I SOLD* 80 shares @ $9.50 each (+$5 commission).


To get the new ACB (I use adjustedcostbase.ca), i need to determine:


Adjusted Capital Loss	$ (Enter CDN Dollar amount)
Add Reduction in Capital Loss to ACB? Select *Yes / No? *





Would the superfical loss _only_ be the amount lost on 50 out of the 80 shares sold yesterday? 
Would i count the entire $5 commission (technically speaking)? 

I apologize in advance if that's a mess, i wasn't sure how else to post it. Thank you to everyone for your help.


----------



## Eclectic12 (Oct 20, 2010)

You bought twice and have sold after the two buys ... are you planning on buying the same stock before Dec 11th?

If not ... there is no superficial loss.


Cheers


----------



## Justin1980 (Feb 23, 2013)

Eclectic12 said:


> You bought twice and have sold after the two buys ... are you planning on buying the same stock before Dec 11th?
> 
> If not ... there is no superficial loss.
> 
> Cheers


Thank you brother.

Does it matter that i didn't sell ALL my shares? I didn't understand why it would, but it says here:

_What is a superficial loss?

A superficial loss can occur when you dispose of capital property for a loss and:

you, or a person affiliated with you, buys, or has a right to buy, the same or identical property (called "substituted property") during the period starting 30 calendar days before the sale and ending 30 calendar days after the sale; *and*
you, or a person affiliated with you, still owns, or has a right to buy, the substituted property 30 calendar days after the sale._

EDIT: Im sorry, i thought that big "AND" was an "OR" which would have cause the underlined portion to be relevant to me. But it's not/

Sorry about that, and thank you for helping brother.


----------



## moisimplementmoi (Oct 20, 2014)

would the answer be different if he sold 120, since he bought within 30 days before? i really never am sure how the before works....


----------



## Eclectic12 (Oct 20, 2010)

Justin1980 said:


> Thank you brother.


Don't thank me too quickly ... we all make mistakes. :biggrin:

For some reason my failing eyesight read the dates as Aug 2nd, Oct 3rd for the buys, which are both 30+ days before the sell on Nov 10th.
As the second buy is less than 30 days before, I believe this would be a superficial loss.

According to this tax web site says:


> To clarify, when an individual disposes of a capital property and the same or substituted property is acquired by the individual or an “affiliated person” within the 61 day period, the loss will be considered superficial and deemed to be nil.


http://www.taxpage.com/Articles/Superficial-Loss-Rules.htm


As I understand it, the bad news is that you can't use the capital loss against the sale proceeds but the good news is that the CL is added to the ACB so that when the shares are sold in the future, the CL will be included.



So on Aug 2nd, total ACB = (# shares x share price) + buy commission = (100 x $10) + $5 = $1005. On a per share basis, $10.05 is the result.

On Nov 3rd, total ACB = (previous total ACB) + (next purchase) = ($1005) + [(50 x $9) + $5] = $1005 + $455 = $1460. 
To get the per share ACB, is total ACB divided by number of shares = $1460 / 150 = $9.73

On Nov 10th, 80 shares were sold where the CL/CG = Proceeds - (ACB *for that number of shares*) - sell commission

As an aside, this is where keeping track of the "per share" ACB is useful as the ACB part becomes simply multiplying the # sold x the per share ACB.

So this ends up being = (# shares x share price) - (# shares x per share ACB) - sell commission 
= (80 x $9.70) - (80 x $9.73) - $5 = $776.00 - $778.40 - $5.00 = - $7.40.

As it is a negative, this would normally be a CL ... usually this would be reported on Schedule 3 of the tax return. It would reduce that year's capital gains or could be carried back up to three years or carried forward to use against future capital gains. The ACB per share would still be the same $9.73 but the total ACB would be reduced as there's only 70 shares left (i.e. 70 x $9.73 = $681.10).


Since it is a superficial loss, my understanding is that nothing is reported on Schedule 3 of the tax return and the CL amount is added to the ACB. So the total ACB for what's left + the CL = $681.10 + $7.40 = $688.50.

Since the ACB is now higher ... the effect is that the date of when it comes into play has changed, not that it is lost for good.


So far (knock on wood), I've always managed to sell 50+ days after a buy so I haven't had to do this sort of calculation or reporting for myself.




Justin1980 said:


> Does it matter that i didn't sell ALL my shares?


AFAICT ... it makes no difference the number of shares ... what matters is whether the same shares were bought +/- 30 days or if the rights to re-buying an identical property are in place.


Sorry if I caused some confusion.


Cheers


----------

