Superficial loss

The two tests

A loss is superficial only when both tests are met. The first test looks at a window of 61 days: the 30 calendar days before the sale, the day of the sale and the 30 calendar days after it. If you, or someone affiliated with you, acquires the same or identical property, or a right to acquire it, at any point in that window, the first test is met. The second test asks whether you or that person still owns the replacement property, or the right to buy it, on the 30th calendar day after the sale.

The CRA gives examples of affiliated persons: your spouse or common-law partner, a corporation controlled by you or by your spouse or common-law partner, a partnership and its majority-interest partner, and a trust and its majority-interest beneficiary. Count calendar days, not trading days.

An illustrative example

Suppose you sell 100 shares for $3,000 that have an adjusted cost base of $5,000, a $2,000 loss. Fifteen days later you buy 100 identical shares for $3,100 and still hold them. The $2,000 loss is superficial, so you cannot deduct it on your return.

You can usually add it to the adjusted cost base of the new shares, which becomes $5,100. If you later sell those shares for $3,500, you have a $1,600 capital loss at that point, ignoring commissions. The rule delays the loss rather than removing it, provided you are the person who acquired the replacement property. The figures are illustrative.

Situations the rule does not cover

The CRA lists common cases that are not treated as superficial losses. These include a deemed sale when you become or stop being a resident of Canada, a deemed sale from a change in use, a sale on death, and the expiry of an option. Loss recognition for non-depreciable property sold by a corporation, partnership or trust is deferred under separate rules.

Common mistakes and what to discuss with your accountant

The most common mistakes are repurchasing the same security within the window to keep a position, forgetting that a spouse’s account or a corporation you control can trigger the rule, and miscounting the 30 days on either side of the sale. Check whether automatic purchase plans could buy the same security in the window.

Bring statements for every account held by you, your spouse or common-law partner and any corporation you control. Ask how to record the added cost base and how the rule applies when an affiliated person, not you, bought the replacement property.