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Discussion Starter #1
I think I understand how the Superficial Loss rule works if I sell 100 shares at a loss, don't wait 30 days, and buy the 100 shares back again.

BUT, what happens if:

1. I sell 100 shares at a loss, and 15 days later buy back 25 shares. Do I get to claim an actual loss on 75 shares, and a superficial loss on 25 shares (and therefore adjust the cost base of those shares?)

2. I sell 100 shares at a loss, and I still hold 200 shares, and 15 days later buy back 25 shares. Is this the same as #1?
 

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^^^

That's my understanding ... though keep in mind that the result of buying the new shares in a taxable account is that the loss is being converted from "gone for good" to "a reduction in future capital gains".

Take example #1 ... say the 100 shares were bought for $10 then sold for $5 so that the loss is $500.

If the 25 shares were bought in a registered account (i.e. TFSA or RRSP), the loss is gone for good. If the shares were bought in a taxable account for say $3, the ACB of the 25 shares = cost of 25 shares + the superficial loss = (25 x $3) + $500 = $575. Without the superficial loss being rolled into the new shares ACB, the ACB would have been $75.

The future capital gain is being reduced by the same amount as the loss that would have been claimed ... only the timing of when it takes effect have changed.


The big deal is that by avoiding the superficial loss rules you can save money in tax today AND/OR in the future as opposed to only in the future if you trigger the superficial loss rule.
http://wheredoesallmymoneygo.com/superficial-loss-rules-in-canada/


Say then one sells the 25 shares about six months later in a way that avoids triggering the superficial rules where the 25 shares are sold at $7. The proceeds will be 25 x $7 = $175 but the ACB will be $575. The net result will be a $400 capital loss.


I'm not a tax expert so this is my understanding of the CRA links plus other info ... if in doubt, make sure to check with a tax professional.


Cheers
 

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YMMV for whether a cheque is needed or not.

For a cheque to be needed, there would have to be other capital gains which one was expecting the superficial loss to reduce/cancel out.

If this is the only capital gains transaction, the change is to have column 5 "Gain or Loss" for Schedule 3 "Capital Gains or Losses for year 2014", part 3 "Publicly traded shares, MF unit ..." to be set to $0 instead of reporting a CL (say $500 from our example).


Try to attach a note to the return to avoid questions from CRA and keep good records yourself as it would be easy to forget and end up overpaying the taxes.


Cheers
 

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Discussion Starter #7
Yes, early in the year there were gains on this security. The superficial losses were late in the year, and are greater than the gains from earlier in the year. But they are 'superficial'.
 

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^^^^

Fair enough ... I assume you've also checked for legitimate losses from other stocks in previous years that haven't been used yet?
That's another source of avoiding writing the cheque .... but only if there are unused losses.

Cheers
 
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