Weekly Tax Tips
Consider selling investments with accrued losses before the end of the year
Date: 2 Dec 2011
If you’ve realized capital gains in the year, consider selling assets with an accrued loss to offset the gains. You may also want to realize the loss if you’ve had capital gains in the last three years that weren’t offset by your capital gains exemption. In order for a disposition of marketable securities in an open market to be included in your 2011 tax year, you’ll have to sell them on or before the stock exchanges’ last trading day for settlement in 2011. The settlement date for most Canadian and U.S. stock exchanges generally takes place three business days after the trade date. For Canadian exchanges, December 23 would generally be the last trading date if you want to have the transaction settled in 2011. For U.S. exchanges, the last trading date would generally be December 27.
Note that rules (known as the stop-loss rules) apply to deny losses on certain dispositions of property, such as:
- Where you transfer an asset to your spouse or a corporation controlled by you and/or your spouse; or
- Where you sell an asset on the open market, and you, your spouse or a corporation controlled by you or your spouse reacquires it within 30 days of its disposition.
Note that these stop-loss rules will also apply where you sell or contribute an asset to your’s or your spouse’s RRSP or TFSA at a loss or where you sell an asset at a loss and that asset is repurchased in an RRSP or TFSA belonging to you or your spouse within 30 days.
These rules are complex and can apply in situations not discussed here, so consult with your BDO advisor. As well, read our Tax Factor 2008-02 article “Tax Rules to Remember When Triggering Capital Losses”.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 2 Dec 2011.
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