# Tax loss, superficial loss, RRSP repurchase



## NorthernRaven (Aug 4, 2010)

Just a hypothetical question regarding superficial losses and RRSPs. Suppose someone had 100 shares of Acme Corporation in a regular trading account, bought at $200, now trading at $100. If they wanted to harvest a tax loss, but not give up the position, they'd obviously be stymied by the 30-day superficial loss repurchase restriction. Even their RRSP would be constrained from repurchasing for the 30 days. 

But what if they first buy another 100 shares within the RRSP, then sell the original unregistered shares? The RRSP shares wouldn't have any effect on ACB calculations, but would the "previous 30 days" provision cover the RRSP purchase? I assume it would, and the unregistered sale would be a superficial loss?


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## CanadianCapitalist (Mar 31, 2009)

Yes it would since the superficial loss rules apply to transactions made within RRSP accounts. 

http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4037-e.html#P2313_116906



> 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.
> ...


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## NorthernRaven (Aug 4, 2010)

As I suspected, but I thought there might be something I was missing, since the superficial loss effectively disappears (there is nothing to do an ACB adjustment on). But I guess it falls into the "anything useful is forbidden" metarule...


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## andrewf (Mar 1, 2010)

An interesting thing to think about is matching a short position in a non-registered account with a long position in a registered account.

You could generate capital losses in non-reg, and capital gains in your TFSA in an essentially riskless transaction (from a total portfolio perspective). Especially handy if you do this with index funds that have analogues as a way of circumventing the superficial loss rule.


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## CanadianCapitalist (Mar 31, 2009)

If I buy Acme again within the 30 day period in a taxable account, I'll add the superficial loss to the ACB. If I had bought Acme in a RRSP account instead, I have a superficial loss and I can't deduct it against capital gains for the year.


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## slacker (Mar 8, 2010)

andrewf said:


> An interesting thing to think about is matching a short position in a non-registered account with a long position in a registered account.
> 
> You could generate capital losses in non-reg, and capital gains in your TFSA in an essentially riskless transaction (from a total portfolio perspective). Especially handy if you do this with index funds that have analogues as a way of circumventing the superficial loss rule.


Yes, upon further readings, this is what the "short against the box" rule was created to combat. To stop people from creatively short and long at the same time for tax deferral/avoidance.

I'm not 100% sure that there is such a rule in Canada (can't find it anywhere), but it is somewhat enforced by the brokerages (yes, even TD and Questrade). But enforcement cannot fall entirely on the brokerage, because a determined individual could short with one brokerage, and long with another.

This is unfortunately, because one form of Norbert's Gambit does involve going short and long at the same time, but the purpose of the gambit is not to gain any tax advantages. That's too bad.


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