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Now is a good time to do some tax loss selling!

Do you have any stocks that are worth less now than when you bought them? Some oil stocks come to mind. Did you have some capital gains in 2012, 2013, or 2014? Now is a good time to use those losses to your advantage. You can sell those stocks and have the capital losses applied to other capital gains.

You can apply your capital losses to past, current or future capital gains. If you do not have enough gains this year to use all your capital losses. These losses can be carryforward until used or carried back to apply to capital gains in the last three years. You can have those capital losses in 2015 applied to your capital gains in 2012, 2013, and/or 2014. This is done by using Form T1A on your 2015 tax return.

If you are not sure how to do this talk to me or your tax advisor.

Timing of tax loss selling is important.

First make sure the sale occurs in 2015. Watch the transaction order dates and transaction dates. The transaction date must be completed in 2015 to use it this year. There is usually a delay of 2 or 3 days in trading stocks and with the holidays make sure you place your order in time. If you plan to buy those stocks again make sure you do not have a superficial loss.

Superficial Loss

If you or a person affiliated with you buys the same stock either 30 calendar days before or after the sale your loss is now a superficial loss. That means you cannot use the deduction. Affiliated person means your spouse or common-law partner, a corporation you control, a partnership or a majority interest partner of the partnership, or a trust. That also includes any registered investment vehicles you have such as an RRSP, RESP, RRIF, TFSA and etc.. Yes, I know their definition of affiliated person includes much more than persons in any normal definition.

If you want to do some tax loss selling make sure to not buy it back within those 30 days on either side of the sale.

You can use that superficial loss rule to your advantage. If your spouse buys that same stock within the 30 days you have a superficial loss. This superficial loss is added to the ACB (Adjusted Cost Base) of your spouse’s purchase of the stock. Make sure your spouse keeps those stocks for at least 30 days. If your spouse has capital gains this will allow your spouse to use this capital loss. This is a neat way to transfer losses to your spouse.

Make sure you discuss this with your tax advisor to make sure you do this correctly.

Categories: Tax Planning


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