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Terminology: Tax-loss Selling

There is a lot of terminology to learn in the "money world" so I have decided to occasionally provide little snippets regarding terminology or strategies. "Tax-loss harvesting" involves selling a security with a capital loss in order to offset realized capital gains in your non-registered accounts. The end result can reduce your taxes payable. Remember, your capital losses can be applied in the current year, carried back three years or carried forward indefinitely.

Tips to Be Wise:

  1. If you tax-loss sell do not repurchase the same securities too soon. As per the Income Tax Act, you must wait at least 30 days after the sale to repurchase the security. This applies anyone considered your " affiliated person" , such as a spouse or common-law partner.

  2. You would also violate the "superficial loss" rules if they bought the same securities during the period beginning 30 calendar days before the sale.

  3. Grow your knowledge by exploring CRA's definition of “same securities” or “identical property” before you follow through on this strategy.

The last day to tax-loss sell Canadian-listed stocks is Wednesday, Dec. 27. If you wait all your trades executed on Dec. 28 and 29 will settle on Jan. 2 and 3, 2024, respectively — making them ineligible for tax-loss harvesting in 2023.


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