Consider a sale of securities with accrued losses in order to offset capital gains in the year.
In order to reduce their tax burden, Canadian taxpayers can apply capital losses against capital gains. When selling an investment within a non-registered account, such as a stock or a bond, for less than its adjusted cost base, a capital loss may be triggered. These capital losses can be used to offset capital gains within a non-registered account, reducing the tax burden within the current year or in the three preceding years. Known as tax-loss selling or harvesting, the flexibility of this tax strategy makes it an appealing one to many investors.
Such tax-loss selling must be implemented no later than December 27, 2023, for the capital loss to be triggered during the 2023 taxation year. Prior to this date, investors should review their non-registered portfolios to identify any securities that have accrued losses. It is vital to ensure that a tax-loss sale makes sense from an investment perspective and individuals should consult with their tax experts and investment advisors to avoid issues like the Superficial Loss Rule (SLR).
An SLR occurs when both of the following conditions are met:
- You, or a person affiliated with you, buys, or has the right to buy, the same or identical property during the period 30 days before the sale until 30 days after.
- You, or a person affiliated with you, still owns, or has a right to buy the same or identical property 30 calendar days after the sale
A further superficial loss explanation, including examples of affiliated persons can be found at this CRA website.
Contact the tax experts at Bateman MacKay for advice on tax-loss selling and other strategic tax, accounting and business advice. Topical accounting, tax and business advisory articles pertinent to business owners can be accessed by subscribing to our blog and following us on LinkedIn.
