What is a Superficial Loss?

Posted Dec 6th, 2021 in Ask ATAP

What is a Superficial Loss?

Q:  I read online that you should sell your losing stocks by year-end to offset any capital gains.  On December 20 last year, I sold off a stock and realized a $20,000 capital loss.  I bought the stock back on January 5 of this year – can I still claim the loss? 

A:  Unfortunately, no.  This will be considered a superficial loss and special rules apply.

If you, or a person affiliated with you, purchases (or has the right to purchase) the same stock within 30 calendar days of the sale date, you cannot deduct the resulting loss against your other capital gains.

You may be able to add the resulting loss to the cost base of the substitute shares you purchased, which will decrease your capital gain or increase your capital loss when you ultimately dispose of those shares.

There are certain circumstances when the superficial loss rules may not apply.  For help in determining if these provisions apply to you, or for help in properly calculating your capital gains and losses for the year, contact an ATAP member today.

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