# Tax loss harvesting: is it worth it?



## james4beach (Nov 15, 2012)

I'm sure others are starting to ask themselves the same question... is it time to do tax loss harvesting?

I used to think this was a freebie: you sell, switch into an equivalent, and walk away with a capital loss (always useful to have!).

But then someone pointed out to me that the tax loss harvesting *resets the cost basis lower,* which means your capital gains in the future will be higher. So yes, you get the cap loss today which reduces your taxes, _but your taxes in the future will increase._

So it's not a "freebie". When does it make sense to do?


Example 1: you have a very high tax rate today but know your income, and tax rate, will be lower in the future. You could harvest losses, use the cap loss to reduce your immediate taxes, and since your future taxes are lower anyway you still come out ahead.

Example 2: you expect your tax rate to be steady going forward. Does tax loss harvesting make any sense in this scenario?


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## gardner (Feb 13, 2014)

The times I have done it is to realize a loss that I can apply back to a prior year when I had a high marginal rate and a large enough CG to be worthwhile. I used to make 1/3 of my income on ESPP and RSUs which I generally sold for huge gains. I also was earning a high salary and had a >50% marginal rate. The first couple of years after retirement I was sending losses back to the last years I worked. Going forward I intend to manage my marginal rate in the 30% range or less.


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## james4beach (Nov 15, 2012)

gardner said:


> The times I have done it is to realize a loss that I can apply back to a prior year when I had a high marginal rate and a large enough CG to be worthwhile


That's interesting, and I'm not familiar with this process. Let's say I realized some huge capital losses this year.

I had a high income in 2018 and 2019 (much higher than my current tax rate) . Can I apply this CL to one of those previous years? What's the mechanism to do that?

I suppose it would have to apply to capital gains in those 2018 and 2019 years?


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## Numbersman61 (Jan 26, 2015)

You can only deduct capital losses against capital gains.


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## m3s (Apr 3, 2010)

I did some tax loss harvesting last year to mitigate my capital gains

I hadn't thought of how it can effectively lower the cost basis "of that specific chunk of money" and it took me a minute to get what you meant. My strategy was to also use those funds to raise the cost basis of the investment I had massive gains on. Kind of a double play at least for that tax year

All in all buy and hold is much less headaches


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## james4beach (Nov 15, 2012)

Numbersman61 said:


> You can only deduct capital losses against capital gains.


True, but isn't there value in generating the capital loss, since it carries forward indefinitely?

One could create the CL and keep it in the bag until a future year. Then, use it strategically in a year where your tax burden is high and you have cap gains to wipe out.

Is that a good strategy?


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## Covariance (Oct 20, 2020)

james4beach said:


> I'm sure others are starting to ask themselves the same question... is it time to do tax loss harvesting?
> 
> I used to think this was a freebie: you sell, switch into an equivalent, and walk away with a capital loss (always useful to have!).
> 
> ...


It makes sense to execute this strategy when you have gains that would cause you to pay cash taxes. By incurring the loss you reduce your cash tax. It is for this reason they are implemented close to year end.


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## Covariance (Oct 20, 2020)

james4beach said:


> That's interesting, and I'm not familiar with this process. Let's say I realized some huge capital losses this year.
> 
> I had a high income in 2018 and 2019 (much higher than my current tax rate) . Can I apply this CL to one of those previous years? What's the mechanism to do that?
> 
> I suppose it would have to apply to capital gains in those 2018 and 2019 years?








How do you apply your 2020 net capital loss to previous years? - Canada.ca


Information on capital losses, and on different treatments of capital gains that may reduce your taxable income.




www.canada.ca


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## Gator13 (Jan 5, 2020)

Very early in the pandemic I took the opportunity to sell any BBB Grade or less holdings we had and replace with BBB+ Grade or better holdings. Booked some nice capital losses that I used to sell some legacy mutual fund holdings. The new stocks have done very well since then and we came out of it with holdings we are very comfortable holding through volatile times like now.


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## gardner (Feb 13, 2014)

james4beach said:


> One could create the CL and keep it in the bag until a future year. Then, use it strategically in a year where your tax burden is high and you have cap gains to wipe out.


Selling a rental property might be a single year tax event that you'd want to offset with losses in other years. A 400k gain could put you near the top MR. This year I sent a small loss back to the year we sold our rental property. I'll get a few bucks back, but nowhere near as juicy as when 2017 was still reachable.

Most gains in securities you can spread out over multiple years to keep the tax hit at bay.


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## off.by.10 (Mar 16, 2014)

james4beach said:


> Example 2: you expect your tax rate to be steady going forward. Does tax loss harvesting make any sense in this scenario?


Yes, the tax you pay now is money which will not generate returns between now and when you finally sell. It's the same reason a RRSP is a large win even if you have the same tax rate all the time. I think you'd have to consistently harvest a lot of losses to see a significant benefit however.


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## gardner (Feb 13, 2014)

james4beach said:


> What's the mechanism to do that?


Studio tax can generate a Form T1A, Request for Loss Carryback and I think it will even netfile it. There was a recent thread about whether it was good to submit the main return and carryback simultaneously or wait for the NOA. I just do them together.


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## james4beach (Nov 15, 2012)

Fascinating stuff guys. Thanks, I'm learning a lot. I will have to think through this one.

Are any of you ever concerned about doing the tax loss selling, ending up with a lower ACB and therefore more cap gains later in the future? I just have trouble wrapping my head around this "negative consequence".

After what you have posted and @off.by.10 's point about the benefit of avoiding those cash tax payments today, I am now leaning towards using tax loss selling whenever I can. It just seems awfully useful to have this "stash" of capital losses to use, since tax law is so generous with how we can use them. As for the extra cap gains due to the lower ACB... well as @gardner says, you can always spread out CGs on securities over multiple years. So the disposition and CGs can be controlled easily in the future.

The stash of cap losses is flexible and can be used strategically. The negative consequence of higher cap gains can also be mitigated by strategic disposition later in life.


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## gardner (Feb 13, 2014)

For my part, I have only purposely generated a loss when I knew I could send it back in time to a year when it would have a beneficial impact. I could picture doing it if I knew I had a big single hit gain coming up, like selling a cottage or something. It has never crossed my mind to generate a loss just because I can, and hold it just in case.


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## james4beach (Nov 15, 2012)

gardner said:


> For my part, I have only purposely generated a loss when I knew I could send it back in time to a year when it would have a beneficial impact. I could picture doing it if I knew I had a big single hit gain coming up, like selling a cottage or something. It has never crossed my mind to generate a loss just because I can, and hold it just in case.


Ah ok. So you've never generated them just to add capital losses to the carry forward balance.

They are just so convenient and easy to use when available. All it takes is an entry on Line 25300, and the CRA automatically updates your carry-forward balance. I used this in my 2021 taxes to wipe out a material capital gain.

Has anyone else here considered generating cap losses, just to have them available for later?


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## Ponderling (Mar 1, 2013)

We do it two ways - tax loss selling like others up thread and also to trigger CG's on stocks while tax inclusion rate is still 50%. 

Most non reg are in wife's name. She is retired and no oas, cpp taken yet and RRIF land is still 13 years away for her. 

So we sell until her income is not quite to the next marginal tax rate. Last year, owing mostly to DTC on divvy income she paid $4.2K tax on 58K of gross income, with 25K of divvy and the rest as taxable portion of capital gains.


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## Covariance (Oct 20, 2020)

james4beach said:


> Fascinating stuff guys. Thanks, I'm learning a lot. I will have to think through this one.
> 
> Are any of you ever concerned about doing the tax loss selling, ending up with a lower ACB and therefore more cap gains later in the future? I just have trouble wrapping my head around this "negative consequence".
> 
> ...


I would not over think this one. At any given moment the higher order investment decision is - do I want this thing in my portfolio or not?. In October, November, December there is an additional decision which is - do I have gains this year that I will pay tax on? If so do I have assets in a loss position that have limited near term upside and make sense to to part with to reduce net capital gains (and cash taxes)?

Said differently, every day we should be selling stuff that has no upside. Irrespective of tax. Cash has a beta of zero and anything with upside is even better. At year end there is an additional incentive to part with losses to reduce cash taxes (but only if they offset realized gains).


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## doctrine (Sep 30, 2011)

Tax loss harvesting is a good tool to remind yourself to reassess your losing positions. If you think the stock will go up, sure, no point in selling, and maybe you should average down. But a lot of people will hold onto losing positions for longer than they should, often in the unrealistic hope of "recovering their capital". Sometimes, they hold them until the companies go to zero and even delisted. Time to move on, and the tax loss can be an incentive to do so and get some of your money back.

I have rarely sold a losing position that had a magical comeback afterwards. Maybe they've solved their problems and recovered 3-4 years later, but its rarely more than a market return.

On the other hand, I have a strong track record of successfully deploying capital into new ideas. And there is a good psychological feeling associated with dropping depressing positions that aren't working and moving forward. Provided they are not working for fundamental reasons, and not reasons that just require time or macro changes to fix. I would hold onto the best company in a poor industry if the industry has a cyclical history of rebounding, rather than holding a bad company in a hot market.


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## Covariance (Oct 20, 2020)

doctrine said:


> Tax loss harvesting is a good tool to remind yourself to reassess your losing positions. If you think the stock will go up, sure, no point in selling, and maybe you should average down. But a lot of people will hold onto losing positions for longer than they should, often in the unrealistic hope of "recovering their capital". Sometimes, they hold them until the companies go to zero and even delisted. Time to move on, and the tax loss can be an incentive to do so and get some of your money back.
> 
> I have rarely sold a losing position that had a magical comeback afterwards. Maybe they've solved their problems and recovered 3-4 years later, but its rarely more than a market return.
> 
> On the other hand, I have a strong track record of successfully deploying capital into new ideas. And there is a good psychological feeling associated with dropping depressing positions that aren't working and moving forward. Provided they are not working for fundamental reasons, and not reasons that just require time or macro changes to fix. I would hold onto the best company in a poor industry if the industry has a cyclical history of rebounding, rather than holding a bad company in a hot market.


I agree. If the overall market goes down it’s one thing. But management causing self inflected pain is another.


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## james4beach (Nov 15, 2012)

Covariance said:


> I would not over think this one. At any given moment the higher order investment decision is - do I want this thing in my portfolio or not?


But I'm talking about something a bit different. By substituting highly correlated alternatives, I can realize a loss without exiting the position. I'm not talking about getting out of investments or disposing of them because I don't want them any more.

I really mean harvesting. For example, sell XIC (at a loss) and immediately buy XIU within a few seconds. That preserves the investment while realizing a capital loss. It's allowed by CRA because these are not identical securities, don't track the same index.

Declines in securities presents me the opportunity to do such a "harvesting". I see this as a completely different issue than whether I want to hold the investment long term. Everything I hold is something I plan to keep holding onto.


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## Covariance (Oct 20, 2020)

james4beach said:


> But I'm talking about something a bit different. By substituting highly correlated alternatives, I can realize a loss without exiting the position. I'm not talking about getting out of investments or disposing of them because I don't want them any more.
> 
> I really mean harvesting. For example, sell XIC (at a loss) and immediately buy XIU within a few seconds. That preserves the investment while realizing a capital loss. It's allowed by CRA because these are not identical securities, don't track the same index.
> 
> Declines in securities presents me the opportunity to do such a "harvesting". I see this as a completely different issue than whether I want to hold the investment long term. Everything I hold is something I plan to keep holding onto.


I am not following how this is a way to benefit you unless there you expect one ETF to perform better than the other. If you start with $100, lose 10 and then switch at time T+1 your investment in ETF2 is 90 and you have a $10 loss to be used later. If ETF2 goes on to a 20% gain to reach $108 in a few months you have a gain of 18 less the loss of 10 for a net taxable gain of $8 [18-10]. Had you stayed in ETF1 you would have the same gain of $8 [108-100] under the constraint that both ETFs have the same return.


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## AltaRed (Jun 8, 2009)

The only value to me in harvesting a tax loss is to offset either known cap gains this year, or retrospectively over the past 3 years, due to a year of atypical capital gains, or if one believes they are going to have an atypical cap gain in the near term future such as an investment RE sale, or a consolidation of holdings to a couch potato portfolio. IOW, marginal tax rate management.

This worked well for me in the financial crisis where, for example, I harvested a loss in SPY and bought VTI instead, I used that cap loss to offset a large cap gain a few years later when I sold some raw land. I don't foresee another example of this occurring in my life time, if for no other reason than I really have little opportunity to harvest a tax loss again, a 30% bear notwithstanding for a half dozen holdings or so that don't have that much unrealized cap gains currently. 

I really don't see the value in holding cap losses for the long term because the future value of those diminish due to inflation and time value of money.


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## Numbersman61 (Jan 26, 2015)

In 2020, I had a large capital gain on the sale of a vacation property. I partially offset this gain by realizing a capital loss on the sale of Enbridge preferred shares. Purchased another class of Enbridge Prefs with slightly different terms - now have a large unrealized capital gain.


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## off.by.10 (Mar 16, 2014)

james4beach said:


> Has anyone else here considered generating cap losses, just to have them available for later?


I don't do it on purpose because the tax treatment is different. Losses you apply to gains in the same year reduce your income directly. Losses you carry forward are credited on your tax bill a bit further down (I think, someone correct me if I'm wrong here). The former is better for various benefits based on taxable income.

I just try to match gains with losses when I want to rebalance things or change some positions for whatever reason. I don't go out of my way to make it happen.


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## Spudd (Oct 11, 2011)

off.by.10 said:


> I don't do it on purpose because the tax treatment is different. Losses you apply to gains in the same year reduce your income directly. Losses you carry forward are credited on your tax bill a bit further down (I think, someone correct me if I'm wrong here). The former is better for various benefits based on taxable income.
> 
> I just try to match gains with losses when I want to rebalance things or change some positions for whatever reason. I don't go out of my way to make it happen.


Losses you apply to gains in the same year directly reduce your capital gains for the year. Losses from previous years reduce your taxable income, which is the final step before you calculate taxes. I don't see how this would make a difference.


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## off.by.10 (Mar 16, 2014)

Spudd said:


> I don't see how this would make a difference.


Total income will be different. Probably a minor thing for most people.


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## Numbersman61 (Jan 26, 2015)

Spudd said:


> Losses you apply to gains in the same year directly reduce your capital gains for the year. Losses from previous years reduce your taxable income, which is the final step before you calculate taxes. I don't see how this would make a difference.


I believe it can affect income for OAS clawback calculation.


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## gardner (Feb 13, 2014)

Those who live in fear that the CG inclusion rate might change should take note that it is not the loss, but the taxable loss that is carried forward, so a change in inclusion rate would likely work against them, bringing 50% of a loss this year to only partially offset 60% (say) of a gain in some future year. It would likely be better to just avoid a future gain rather than artificially create an offsetting loss today.

Personally I don't think there's any chance of a change to inclusion rate, but who can be sure. It seems to be the conservatives mainly fear mongering about it -- and coincidentally the conservatives were the last to raise the inclusion rate to 75 per cent in 1990. Maybe they know something we don't.


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## Eclectic21 (Jun 25, 2021)

Numbersman61 said:


> Spudd said:
> 
> 
> > Losses you apply to gains in the same year directly reduce your capital gains for the year. Losses from previous years reduce your taxable income, which is the final step before you calculate taxes. I don't see how this would make a difference.
> ...


There is no "believe" ... it does - as the Taxtips.ca entry that I have reformated below points out.



> Capital and non-capital losses carried forward reduce Taxable Income, but not Net Income (line 23600), so *are of no benefit when calculating eligibility for income-tested benefits*.
> 
> Although capital gains may be eliminated by capital losses carried forward, they may trigger a clawback of Old Age Security (OAS) benefits or a clawback of EI benefits, because the clawbacks are based on line 23400 of the tax return.











TaxTips.ca - Taxable Income: Calculate Total Income, then Net Income, then Taxable Income


TaxTips.ca - Taxable Income is used to calculate income taxes, before the deduction of tax credits




www.taxtips.ca






Same year capital losses are applied before the income test line while previous year losses are applied after the income test line. The dividend tax credit has that same issue of being applied too late.


Cheers


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## Eclectic21 (Jun 25, 2021)

gardner said:


> ... It seems to be the conservatives mainly fear mongering about it -- and coincidentally the conservatives were the last to raise the inclusion rate to 75 per cent in 1990. Maybe they know something we don't.


Hmmm ... vote for us to prevent the others from doing what we did? 

Cheers


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## james4beach (Nov 15, 2012)

Covariance said:


> I am not following how this is a way to benefit you unless there you expect one ETF to perform better than the other. If you start with $100, lose 10 and then switch at time T+1 your investment in ETF2 is 90 and you have a $10 loss to be used later. If ETF2 goes on to a 20% gain to reach $108 in a few months you have a gain of 18 less the loss of 10 for a net taxable gain of $8 [18-10]. Had you stayed in ETF1 you would have the same gain of $8 [108-100] under the constraint that both ETFs have the same return.


Thanks to all of you @AltaRed @off.by.10 for explaining this to me.

I like the way @AltaRed described the logic. That makes sense to me.

Yeah, I don't see any point in harvesting the loss just to carry it forward.


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## peterk (May 16, 2010)

It's a straight forward deferral of taxes, nothing more and nothing less, and brings whatever value that is to you (time-value of $).

I find it odd that people think there would be scenarios where your cap loss wouldn't be used up in the current year almost always, or at least next year. Surely any sizeable portfolio will have little bits of adjustment regularly, even very set-and-forget buy-and-hold type portfolios? and gains are coming in almost every year, no?


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## AltaRed (Jun 8, 2009)

It depends on where one is in the investing journey. About half of my portfolio value is unrealized cap gains and my cap gains each year would far exceed any cap losses I could generate. Only one of my non-registered holdings is currently underwater and harvesting that tax loss will be only a fraction of the cap gains I've already realized in 2022...assuming I pull that trigger this year.

Someone early in accumulation mode will/could have a very different situation.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... Are any of you ever concerned about doing the tax loss selling, ending up with a lower ACB and therefore more cap gains later in the future? I just have trouble wrapping my head around this "negative consequence".


Seems similar to trying to predict retirement needs to the nearest dollar. 

Personally, unless I have some CG to get rid of now - I'm not likely to bother. 




james4beach said:


> ... It just seems awfully useful to have this "stash" of capital losses to use, since tax law is so generous with how we can use them.


Since it can only be used against CG, I wouldn't call it all that generous. Then too, I believe if the inclusion rate changes - so will the effectiveness of the stashed CL.

Don't get me wrong ... I like having it - I'm just not convinced about the "so generous" part.





james4beach said:


> ... As for the extra cap gains due to the lower ACB... well as @gardner says, you can always spread out CGs on securities over multiple years. So the disposition and CGs can be controlled easily in the future.


YMMV ... I doubt those that rode Nortel most of the way down would agree about "always spread out CGs over multiple years". Paying attention and using what you can seems more important to me instead of such black and white statements.




james4beach said:


> ... The negative consequence of higher cap gains can also be mitigated by strategic disposition later in life.


When one pays attention and pulls the trigger, sure. Many held onto Nortel because of they treated it as selling all or nothing.

There's also holding on so long that one has the CG in one lump sum at death. I'm grateful my parents tried for a balance.


Cheers


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## Eclectic21 (Jun 25, 2021)

peterk said:


> ... I find it odd that people think there would be scenarios where your cap loss wouldn't be used up in the current year almost always, or at least next year. Surely any sizeable portfolio will have little bits of adjustment regularly, even very set-and-forget buy-and-hold type portfolios? and gains are coming in almost every year, no?


I guess I don't have a "sizeable portfolio" with bits of adjustment. 
Or maybe it's because you are out of the accumulation phase?

IIRC, the CL from selling a loser that I disagree with where management was going was about $10K where that year's CG was $200. More of the banked CL was used up in following years when high flyers were sold to max out the mortgage annual payment privilege. I'd have to check if that CL was used up completely but I doubt it.



Cheers


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## Franky Jr (Oct 5, 2009)

Nice thread to find today 

I have a loss that I can harvest now, it is in a "his" and "hers" non reg account.
I want to use it to offset a gain from last year, this was only in a "hers" non reg account.
What's the play here? Can I use 50% of the joint account tax loss against the individual account. Or throw in 100% of it. Is it worthwhile?
//


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## Spudd (Oct 11, 2011)

Pretty sure you can only use 50%. When you do your taxes, your tax software should offer to carry back the loss for you. I know Wealthsimple Tax does this. It's handy.


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## Gator13 (Jan 5, 2020)

Franky Jr said:


> Nice thread to find today
> 
> I have a loss that I can harvest now, it is in a "his" and "hers" non reg account.
> I want to use it to offset a gain from last year, this was only in a "hers" non reg account.
> ...


Assuming you have adhered to attribution rules and the joint account is 50/50, she would only be able to claim 50% of the capital loss.


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## Franky Jr (Oct 5, 2009)

That is what I thought the consensus would be, Thanks!


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## cardhu (May 26, 2009)

Franky Jr said:


> That is what I thought the consensus would be, Thanks!


I don’t see any consensus … Gator mentioned the attribution rules and Spudd didn’t … that makes the two answers contradictory.

The correct answer to your question is that BOTH accounts are subject to the attribution rules … and the first thing you need to understand about attribution is that the names on the accounts are irrelevant … so the attribution rules dictate *both* who should have reported the gains from “her” account last year, *and* who can claim any loss harvested from the joint account.

I suspect it is very rare for a joint account between spouses to legitimately be attributed 50/50 … for that to happen, each spouse would have to contribute equal amounts to the account, and at the same time, every time … I have never met, or heard of, anyone who does that … I find that married (or equivalent for tax purposes) couples generally fall into two broad categories … either they are aware of the attribution rules, or they are not … if they are not, then it is extremely unlikely that they’d have stumbled accidentally into a 50/50 attribution … and if they are, then they wouldn’t commingle funds in a single account in the first place, since it is far easier to manage attribution with joint accounts in which only one party contributes.

Having said that, a lot of people do arbitrarily assign a 50/50 split and get away with it ... CRA often ignores this sort of thing, where the amounts involved are small ... just don't make the mistake of thinking that "getting away with it" is somehow equivalent to "legitimacy".


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## james4beach (Nov 15, 2012)

A reminder! You still have a few days left to do *tax loss harvesting* to get a capital loss for 2022.

For example, if you hold a bond fund or ETF in a taxable account, or a stock index.

A few months ago I harvested losses in bonds and I'm going to see if I can harvest anything else in the next few days. Harvesting the losses also gives you the chance to do other rebalancing/switching which could generate CG, since the harvested losses can wipe out any CGs.


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## off.by.10 (Mar 16, 2014)

Is there any way to figure out how much capital gains various ETFs are going to pay out before the year ends? For example, I hold some XIC in a taxable account. Last year, it produced a significant capital gain for the last distribution of the year. This year, it hasn't produced any so far but the numbers for the last distribution are not available yet in the usual location. Given the market this year, I would guess there won't be a lot... but it would be nice to know for sure. If there are to be any, I could harvest some losses to offset them.


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## Eclectic21 (Jun 25, 2021)

I doubt there is a way to figure it out .... short of having someone who works for the ETF company who is "in the know" to give you a heads up.

If you want to get an idea, maybe look at the past history to see what has happened through different market conditions in previous years? Though as they say, past performance does not guarantee future performance!! 


Cheers


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## james4beach (Nov 15, 2012)

off.by.10 said:


> Is there any way to figure out how much capital gains various ETFs are going to pay out before the year ends?


Yeah there's no way to estimate this. But I'm glad you brought this up because this is actually an important to reason to occasionally harvest capital losses and "keep them in the bag" for the future.

Those ETF cap gains always come as a surprise... they're unpredictable... so if you're sitting on some capital losses, perhaps by carrying forward over a few years, when the cap gains pop up unexpectedly you can simply wipe them out.

I always try to harvest capital losses and carry them forward. They've always come in useful. So it's one reason to be proactive and do some tax loss harvesting, even if you think you don't need the cap losses.


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## GreatLaker (Mar 23, 2014)

off.by.10 said:


> Is there any way to figure out how much capital gains various ETFs are going to pay out before the year ends? For example, I hold some XIC in a taxable account. Last year, it produced a significant capital gain for the last distribution of the year. This year, it hasn't produced any so far but the numbers for the last distribution are not available yet in the usual location. Given the market this year, I would guess there won't be a lot... but it would be nice to know for sure. If there are to be any, I could harvest some losses to offset them.


The ETF companies usually publish estimated final cash distributions and reinvested capital gains for tax planning purposes.

BlackRock® Canada Announces Estimated 2022 Annual Reinvested Capital Gains Distributions for the iShares® ETFs
Estimated cap gains distribution for XIC is 3.56% for 2022, but final amounts can vary from that estimate.

BlackRock® Canada Announces Estimated December Cash Distributions for the iShares® ETFs

FWF has a list for the major ETF companies. This one is for reinvested capital gains. There's usually one for cash distributions too, but I don't see it yet.
Estimated Capital Gain Distributions 2022 - Financial Wisdom Forum

Added: Can often be found in the media or press release section of the fund co websites.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> ... I always try to harvest capital losses and carry them forward. They've always come in useful. So it's one reason to be proactive and do some tax loss harvesting, even if you think you don't need the cap losses.


The downside for previous year capital losses (CL) is that when OAS is in play, they are applied _after_ the clawback income test has happened. Only same tax year CL will help.


Cheers


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## james4beach (Nov 15, 2012)

Eclectic21 said:


> The downside for previous year capital losses (CL) is that when OAS is in play, they are applied _after_ the clawback income test has happened. Only same tax year CL will help.


Interesting. I would not have guessed this inter-play with OAS clawback.


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## Numbersman61 (Jan 26, 2015)

james4beach said:


> Interesting. I would not have guessed this inter-play with OAS clawback.


It is always best to claim any capital losses from prior years before you receive OAS. Prior years’ capital losses are not deductible in computing Net income (the deduction is made later in computing Taxable income. The OAS clawback is determined based on Net income.


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## Eclectic21 (Jun 25, 2021)

james4beach said:


> Interesting. I would not have guessed this inter-play with OAS clawback.


Same year capital losses get applied to same year capital gains, on schedule 3 ... so these would help avoiding the clawback threshold.

The previous year capital losses have a similar problem of being applied too late as the dividend tax credit.








TaxTips.ca - Old Age Security Pension (OAS) clawback


TaxTips.ca - The Old Age Security (OAS) clawback is triggered by high income, and can be triggered or increased by capital gains, even if they are offset by capital losses carried forward.




www.taxtips.ca






Cheers


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## off.by.10 (Mar 16, 2014)

Numbersman61 said:


> It is always best to claim any capital losses from prior years before you receive OAS. Prior years’ capital losses are not deductible in computing Net income (the deduction is made later in computing Taxable income. The OAS clawback is determined based on Net income.


No OAS here but I have young children so my real marginal tax rate includes other components based on net income, which is what prompted my question. Thanks to GreatLaker's info, I will set about harversting appropriate losses. Looks like XIC will have significant capital gains again this year. Also smaller gains for other ETFs I hold.


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## GreatLaker (Mar 23, 2014)

off.by.10 said:


> No OAS here but I have young children so my real marginal tax rate includes other components based on net income, which is what prompted my question. Thanks to GreatLaker's info, I will set about harversting appropriate losses. Looks like XIC will have significant capital gains again this year. Also smaller gains for other ETFs I hold.


If your funds have reinvested capital gains, remember to add that amount to your cost base. If you don't you will end up paying tax on those gains again when you sell. Also any return of capital must be subtracted from your cost base or you will under pay tax when you sell.


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## james4beach (Nov 15, 2012)

I accomplished a rare feat ... the *double* tax loss harvest!

With some government bonds (which are very liquid), earlier this year I sold and realized a capital loss.
Then I rotated into an equivalent bond ETF.
Today, I sold the ETF for a second capital loss and re-bought the original bonds!

This accomplished two capital losses on the way down while ending up back in the same position.


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## Faramir (11 mo ago)

For me its one of those morality/values sort of thing. Taking a loss is something I just would never do. I will happily break even. Just like I don't buy banks. I consider the banking establishment of the world as sinister and basically state sponsored fraud. The Rothchilds being the epitome of banking evil.


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## james4beach (Nov 15, 2012)

You think there is a morality problem with taking a capital loss? I never heard that one before.


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