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Calculation of loss

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  • Sep 2nd, 2022 1:23 am
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Member
Jun 14, 2018
231 posts
343 upvotes
Toronto

Calculation of loss

Hi Everyone,

I have a couple of stocks in wealth simple where i am /will be making a loss for this year amounting to 10-15K.
In order to report the capital loss to CRA do in need to sell the stock before the end of the year? or the wealthsimple will generate a report where the capital loss will be reported for the year?

This loss i can claim towards my income tax?
Can anyone please guide
Thank you
17 replies
Deal Addict
Oct 1, 2006
3249 posts
4472 upvotes
Montreal
To trigger the capital loss you need to sell the stock. Capital losses can only be deducted from taxable capital gains. It cannot be deducted from income.
Jr. Member
Mar 6, 2019
175 posts
79 upvotes
Calgary
Just wanted to add that if you trigger the capital loss (by selling the stock) then you can carry this loss forward (future years) or backwards (up to previous 3 years) if you you don't have any taxable capital gains in the current year. The amount of unused net capital losses will be listed on your CRA Notice of Assessment after your tax return is processed.

You can search for various info on carrying losses backwards or forward such as this article:
Carrying Capital Losses Backward or Forward
Deal Fanatic
Jan 21, 2014
8513 posts
6259 upvotes
Is there also the rule that you can not buy it back within at least 30 days period?
Sr. Member
Oct 14, 2012
954 posts
728 upvotes
Woodstock
I hope people are aware that if they sell shares at a loss of $10 000, the loss can be used only to offset an after-sale gain of 10,000. That gain would otherwise have been (at this time) additional taxable income of $ 5 000 . That taxable income would have created tax owing depending on the person's tax bracket. For most people, the tax owing on $5 000 of additional income is usually $ 2 500 or less.

So a person has lost $ 10 000 and is only likely to recover $ 2 500 or less back from taxes. That means a permanent loss of $7 500 or more.

Ouch.
Sr. Member
Jul 31, 2017
510 posts
640 upvotes
Toronto
mkl38s wrote: Is there also the rule that you can not buy it back within at least 30 days period?
You can buy it back, you just can't claim the loss on the prior sale
Deal Addict
Jun 28, 2018
1031 posts
789 upvotes
Toronto
If you want to count it for 2021 remember settlement of trades is Trade Date + 2 Days (T+2). This means you need to sell a couple days before the very last day of trading of the year, otherwise it is counted for 2022.
The Distracted Investor

Dividends through quality companies 😃 Though I usually lose money with trades :facepalm:
Deal Addict
Jun 18, 2018
1984 posts
1453 upvotes
Toronto
BoatyMcBoatface wrote: You can buy it back, you just can't claim the loss on the prior sale
I'm still confused on not having purchased it 30 days prior as well.. like for example:

Bought shares Apr 2021, averaged down Sep 9 2021, shot up the next day and sold everything but still incurred a capital loss. Can I still claim the loss?
Sr. Member
User avatar
Feb 5, 2017
910 posts
913 upvotes
Electrah wrote: I'm still confused on not having purchased it 30 days prior as well.. like for example:

Bought shares Apr 2021, averaged down Sep 9 2021, shot up the next day and sold everything but still incurred a capital loss. Can I still claim the loss?
If you sold ALL your shares, sure, you can claim a loss (against a gain) but do not buy back any shares within 30 days after.
Also, you can sell your losers in october/november then buy back one month after in december during tax loss selling season..and hopefully buy some of them for even less money… this way, you will be able to claim some capital loss and reduce your ACB at the same time if you are lucky
Sr. Member
Jul 31, 2017
510 posts
640 upvotes
Toronto
Electrah wrote: I'm still confused on not having purchased it 30 days prior as well.. like for example:

Bought shares Apr 2021, averaged down Sep 9 2021, shot up the next day and sold everything but still incurred a capital loss. Can I still claim the loss?
Any purchases, including any that reduce your average cost, don't matter if you haven't sold anything yet. As soon as you sell for a loss, then the 30 day period kicks in. My general rule (because i like to keep the end of year reporting as clean as possible) is that when I sell for a loss, I always close the complete position and I never repurchase within 30 days. That way there is no ambiguity or complex calculations needed.
Deal Addict
Jun 18, 2018
1984 posts
1453 upvotes
Toronto
BoatyMcBoatface wrote: Any purchases, including any that reduce your average cost, don't matter if you haven't sold anything yet. As soon as you sell for a loss, then the 30 day period kicks in. My general rule (because i like to keep the end of year reporting as clean as possible) is that when I sell for a loss, I always close the complete position and I never repurchase within 30 days. That way there is no ambiguity or complex calculations needed.
This makes it more simpler, thanks.
Member
Dec 14, 2007
279 posts
228 upvotes
Brossard
Let's say I sold a stock for a gain of $100 on Aug 15.
Bought back the same stock on Aug 31.
Sold the stock on September 1 for a loss of $150.

Can I claim a capital loss of $50 if I don't buy back the stock for 30 days?
Deal Addict
May 2, 2019
1150 posts
1585 upvotes
Vancouver
chico_001 wrote: Can I claim a capital loss of $50 if I don't buy back the stock for 30 days?
Yes, absolutely. Two conditions are needed together to make a loss superficial: you obtained a substituted property within 30 days before or after (which you maybe did in the example if the first purchase was after Aug 1, we don't know), and you held the replacement property until 30 days after the sale in question (which you didn't).

It fits in the simple approach already mentioned: if you close your position completely and don't buy in the next 30 days, you don't need to worry about the superficial loss rule. You can even ignore it for any prior transactions with this stock this year, the claim will be correct. (After January, anyway. Transactions in January might trigger superficial loss for the previous year taxes.)
Member
Dec 14, 2007
279 posts
228 upvotes
Brossard
yvrbanker wrote: Yes, absolutely. Two conditions are needed together to make a loss superficial: you obtained a substituted property within 30 days before or after (which you maybe did in the example if the first purchase was after Aug 1, we don't know), and you held the replacement property until 30 days after the sale in question (which you didn't).

It fits in the simple approach already mentioned: if you close your position completely and don't buy in the next 30 days, you don't need to worry about the superficial loss rule. You can even ignore it for any prior transactions with this stock this year, the claim will be correct. (After January, anyway. Transactions in January might trigger superficial loss for the previous year taxes.)
It's this 30 days before which is not clear to me..

Bought Aug 10, stock ABC
Sold all shares of ABC on Aug 15 for $100 profit
Bought back ABC Aug 31
Sold ABC September 1 for $150 loss.

In that case, I would have a superficial loss because I bought it 30 days ago? or it doesn't matter as long as I don't buy for 30 days?
Deal Addict
May 2, 2019
1150 posts
1585 upvotes
Vancouver
chico_001 wrote: or it doesn't matter as long as I don't buy for 30 days?
it doesn't matter. Not a superficial loss if you don't own any ABC units for 30 days. The document I linked mentions two conditions have to be both met. In this case, the second one is not met:
"You, or a person affiliated with you, still owns, or has a right to buy, the substituted property 30 calendar days after the sale."

The 30 days before rule only triggers when you have some shares remaining. For example: bought 200 units of ABC on Aug 10; sold 100 units on Aug 15 at a profit; bought 100 more units on Aug 31; sold 100 units on Sep 1 at a loss. That's when Sep 1 sale is a superficial loss and cannot be claimed at the time, though it's added to the cost base of the remaining ABC units and will be recovered later.
Member
Dec 14, 2007
279 posts
228 upvotes
Brossard
yvrbanker wrote: it doesn't matter. Not a superficial loss if you don't own any ABC units for 30 days. The document I linked mentions two conditions have to be both met. In this case, the second one is not met:
"You, or a person affiliated with you, still owns, or has a right to buy, the substituted property 30 calendar days after the sale."

The 30 days before rule only triggers when you have some shares remaining. For example: bought 200 units of ABC on Aug 10; sold 100 units on Aug 15 at a profit; bought 100 more units on Aug 31; sold 100 units on Sep 1 at a loss. That's when Sep 1 sale is a superficial loss and cannot be claimed at the time, though it's added to the cost base of the remaining ABC units and will be recovered later.
What happens if you own some shares of the stock in a cash account and registered account?

e.g.
In registered account
Bought 100 shares of ABC on Aug 5

In cash account
Bought 100 shares of ABC on Aug 10
Sold 50 shares of ABC for a profit of $50
Bought 50 shares of ABC on Aug 31
Sold 100 shares of ABC for a loss of $60 on September 1

Since I still own some shares of ABC in my registered account, the superficial loss rule applies even if I don't buy ABC in my cash or registered accounts for the next 30 days?
Deal Addict
May 2, 2019
1150 posts
1585 upvotes
Vancouver
chico_001 wrote: Since I still own some shares of ABC in my registered account, the superficial loss rule applies even if I don't buy ABC in my cash or registered accounts for the next 30 days?
Yes, I believe it fits the superficial loss definition with Aug 5 purchase being the substituted property. The loss therefore cannot be claimed. It is a bit unfortunate, as the intention of the investor clearly wasn't to create an artificial tax claim in this sequence. But that's how the current rules go.

Personally, I try to avoid holding identical investments in registered and non-registered accounts, minding the necessary 30 days gap.

Otherwise, after Aug 5 purchase in the example, could make a note not to sell ABC for a loss in non-registered for the next 30 days.

If it still happened as per example, it's not too late to correct it by selling all ABC in registered within 30 days of Sep 1 - then no superficial loss. Can even rebuy it in non-registered at the same time, however it would become the substituted property and make Sep 1 loss superficial again, with a better impact on the cost base.

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