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Discussion Starter · #1 · (Edited)
Superficial Losses

Hello,

I was wondering how to handle this as I have never experienced an artificial loss (never really had non-registered investments before).

Last year I bought and sold two stocks in my non-registered account. I later moved one stock into my RRSP and the other into my TFSA. Both were transferred in at prices lower than what I paid (superficial loss).

At tax time, do we still need to report these transactions? I would report them if there was a gain but not sure how artificial losses work (can't claim a capital loss when moving into registered accounts).

Any help would be greatly appreciated. Thanks in advance!
 

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Hello,

I was wondering how to handle this as I have never experienced an artificial loss (never really had non-registered investments before).

Last year I bought and sold two stocks in my non-registered account. I later moved one stock into my RRSP and the other into my TFSA. Both were transferred in at prices lower than what I paid (artificial loss).

At tax time, do we still need to report these transactions? I would report them if there was a gain but not sure how artificial losses work (can't claim a capital loss when moving into registered accounts).

Any help would be greatly appreciated. Thanks in advance!
You have to report the transfers to your registered accounts. Unfortunately, if you suffered a capital loss due to the transfer it is considered a superficial loss and cannot be claimed at any time.
 

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The CL for the transfer to the registered account can't be claimed at the time.

I have managed to avoid transferring at in a CL position so I am not sure but I expect one would report the transaction on Schedule 3, Part 3 as usual but one would record the "CG or CL" as zero. If there is a way to attach a note that it is a superficial loss due to a transfer to the registered account, it may avoid any followup questions from CRA.


Going forward, YMMV.

As long as one holds the stock in the registered account, there is no way to capture the CL. Where one sells the stock in the registered account(s) then waits thirty days, the way I read the link below as well as CRA's web site, one could buy a few shares in the taxable account (the CL then gets added to the ACB of the replacement shares) then sell, likely for a CL. Any gains would reduce the CL but most of the CL should still be available.
http://www.taxtips.ca/personaltax/investing/taxtreatment/shares.htm

The trade off here is whether it is worth the time/effort to make sure the stock is sold in *all* registered accounts (i.e. TFSA and RRSP) then re-bought/re-sold in the taxable account.

Depending on how sizeable the loss was (and what the experience going forward in the registered accounts is for the stocks held), it may or may not be worth while keeping in mind and implementing the steps in the future.

If the CL was relatively small, it might be more valuable to consider this a learning experience and make sure the problem is not repeated in the future.


Cheers

PS

Don't forget there are no tax implications in the registered account. So where one had an oil stock that was starting to slide in late 2015, one could have sold in the registered then captured the CL in the taxable and likely re-bought in the registered account at the same or better prices.

The key IMO here is to have a reason to sell in the registered account as well as some degree of confidence that one will be able to re-buy/re-sell in the taxable account with the appropriate waiting periods.

Or if one say sells Royal bank then re-deploys the proceeds into TD bank, then the re-buy/re-sell in the taxable account does not stop one from participating in the market while the CL for Royal is re-captured.
 

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Discussion Starter · #4 ·
The superficial loss was not huge. The stocks (ENB & T) I transferred are long-term holds. I just wasn't sure how to deal with it at tax time.

Thank you kindly to the both of you for taking the time to answer my question. It is much appreciated.
 
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