Capital Losses

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Re: Capital Losses

Postby like_to_retire » 12 Dec 2011 20:18

CROCKD wrote:As this is the season of tax loss selling, my question pertains to capital losses carried forward. So far I have only carried back losses.

To date I have not claimed Carried Forward Capital Losses (Net capital losses of other years) Line253 on the tax form.

Playing around with tax software it seems to me that the total carried forward amount is deducted from Net Income to calculate Taxable Income even if the carried forward amount is more than the taxable capital gain for the year under consideration.

For example Taxable Capital Gain of $205 reported on Line 127
Net capital losses from other years reported on Line 253 of $350

Anyone care to comment?

Turbo Tax (Quick Tax) has always had that bug in my opinion.

I always have a back store of Net Capital Losses from previous years that I take advantage of on the Loss Worksheet every year (that gets transferred to line 253.

I must be sure to only enter an amount equal to line 127 or it will quite happily deduct more than is on line 127, further reducing the taxable income.

This has always left me scratching my head.

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Re: Capital Losses

Postby CROCKD » 12 Dec 2011 20:21

Thanks Sb. I will investigate further. That is what I felt should be the result.
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Re: Capital Losses

Postby CROCKD » 12 Dec 2011 21:26

Thanks also ltr.

After your post I went to another software package I use ( not Quick Tax) and it also allowed me to deduct a larger amount on line 253 than on line 127. Obviously bugs!!
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Re: Capital Losses

Postby Jaunty » 13 Dec 2011 10:03

From the CRA web site (with my bold):
Generally, if you had an allowable capital loss in a year, you have to apply it against your taxable capital gains for that year. If you still have a loss, it becomes part of the computation of your current year net capital loss. You can use a current year net capital loss to reduce your taxable capital gains in any of the three preceding years or in any future year.
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Re: Capital Losses

Postby like_to_retire » 13 Dec 2011 11:07

Jaunty wrote:From the CRA web site (with my bold):
Generally, if you had an allowable capital loss in a year, you have to apply it against your taxable capital gains for that year. If you still have a loss, it becomes part of the computation of your current year net capital loss. You can use a current year net capital loss to reduce your taxable capital gains in any of the three preceding years or in any future year.

Yep, an that's well understand. You may have misunderstood the problem with the software here.

Once you've used this years losses against this years capital gains, the remaining outstanding gains are put on line 127 (taxable capital gains).

You may now used net capital losses from previous years to reduce your taxable income up to the amount on line 127. This entry is line 253 (net capital losses of other years).

You may not apply net capital losses of other years in an amount that is greater than net capital gains. So line 253 may not be greater than line 127.

Turbo Tax allows it to be whatever you like. That seems like a bug to me.

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Re: Capital Losses

Postby Jaunty » 13 Dec 2011 12:53

I was reminded that I should have listed the URL for the page I referred to. The advice is correct and here is the reference.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns248-260/253/menu-eng.html
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Re: Capital Losses

Postby CROCKD » 13 Dec 2011 21:17

From the referenced CRA website page.

The net capital losses of other years generally may be applied against taxable capital gains in the current year


As ltr says, the tax software in question allows you to claim more capital losses than the taxable capital gains in the current year by allowing line 253 to be greater than line 157 and is an obvious bug.
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Re: Capital Losses

Postby Dejavu » 20 Dec 2011 20:16

DW,s TDW sd rrsp acct holds XSP and XIN, which I could sell and trigger 12k in losses and rebuy TDb.911+ tdb.902.
Would this be acceptable by CRA?
Is there still time to complete this year?
Anything I am overlooking?
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Re: Capital Losses

Postby Shakespeare » 20 Dec 2011 20:30

Losses are irrelevant for tax purposes in an RRSP.
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Re: Capital Losses

Postby Peculiar_Investor » 20 Dec 2011 20:33

Capital gains and capital losses cannot be claimed in registered accounts.

As an aside, I find it interesting that T4037 - Capital Gains - 2010 makes no reference to this fact, while T4040 - RRSPs and Other Registered Plans for Retirement 2010 makes only a small reference
Any income you earn in your RRSP is usually exempt from tax for the time the funds remain in the plan. However, you cannot claim a deduction for capital losses within your RRSP.
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Re: Capital Losses

Postby Dejavu » 20 Dec 2011 20:57

Shakespeare wrote:Losses are irrelevant for tax purposes in an RRSP.


Thank you for saving me from an obvious brain fart, Dejavu.
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Re: Capital Losses

Postby CROCKD » 24 Dec 2011 14:16

Apparently Dec 23 was the last day in 2011 to trade stock to claim a Capital Loss ( or Gain) in 2011 because of the 3 day closing time.

As mutual funds settle in one day, can anyone confirm that mutual funds may be traded next week for purposes of capital loss or gains in 2011?
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Re: Capital Losses

Postby adrian2 » 24 Dec 2011 15:02

CROCKD wrote:As mutual funds settle in one day, can anyone confirm that mutual funds may be traded next week for purposes of capital loss or gains in 2011?

It depends where you hold them. In a discount brokerage account, settlement is T+3, so 2011 is closed. If you have a mutual funds only account with the sponsor itself, generally it's T+1 (ING is one exception I know of, using T+3).
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Re: Capital Losses

Postby CROCKD » 24 Dec 2011 15:47

Thanks Adrian. What about a TDWH account holding TD mutual funds.
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Re: Capital Losses

Postby newguy » 24 Dec 2011 15:53

I think you won't have any problems even if you sell a stock. I doubt the CRA really cares all that much. I understand you want to be 100% legal but what's the worst that can happen?

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Re: Capital Losses

Postby IdOp » 24 Dec 2011 16:40

I've seen a mutual fund switch from a T+3 fund to a money market fund (T+1), in the same fund family, at TD Waterhouse recorded as settling in one day, T+1, consistent with the MMF. If someone is desperate next week they could ask their broker how that would be settled, and decide from there.
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Re: Capital Losses

Postby adrian2 » 24 Dec 2011 17:27

IdOp wrote:I've seen a mutual fund switch from a T+3 fund to a money market fund (T+1), in the same fund family, at TD Waterhouse recorded as settling in one day, T+1, consistent with the MMF. If someone is desperate next week they could ask their broker how that would be settled, and decide from there.

That's a good chance that will work. Otherwise, with a non margin account, switching from non MMF (at T+3) to a MMF (at T+1) would result in a negative balance for two business days.

But in general, selling a non MMF (even TD mutual funds) in a TDWH account would settle in 3 business days, so try the switch idea.
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Re: Capital Losses

Postby CROCKD » 26 Dec 2011 13:34

As a result of this thread I have taken a closer look at account activity which I have never taken much notice of before.

Activity in December.

Mutual Funds Sett Date Trade

TD Mutual fund reinvested dividend: 16 Dec 20 Dec

Mawer Mutual fund reinv. dividend 22 Dec 23 Dec

This suggests to me that TD even within their own fund family has the T+3

Whereas Mawer for DRIP and switch probably have T+1


I am interpreting this information correctly.
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Re: Capital Losses

Postby adrian2 » 26 Dec 2011 13:54

Don't look at reinvestment dividend dates at TDW, often settlement is even before the trade date (i.e., delayed posting). Look at real trades, or ask them.
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Re: Capital Losses

Postby CROCKD » 28 Dec 2011 16:09

Called TDWH. Effective date for mutual funds, switch or otherwise is T+3 the same as stocks, so the last day for this year was Friday December 23. This applies to anything with equities in it. The only exception is MMF and I presume at TDWH anyway their new Hi Interest Savings accounts mutual funds.
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Re: Capital Losses

Postby IdOp » 29 Dec 2011 00:29

That's odd. I just checked some statements from earlier this year, where I had switched a bond fund to the MMF. A bond fund will also settle in T+3 if it is sold. Both the TD-W transaction confirmation and the monthly statement for that switch showed the bond fund exit to settle in T+1. So I can't explain what the agent told you, it seems to contradict with this, but maybe they are right.
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Re: Capital Losses

Postby adrian2 » 29 Dec 2011 09:31

IdOp wrote:So I can't explain what the agent told you, it seems to contradict with this, but maybe they are right.

I bet the agent did not understand the details of your question.

There's still time to do it today; call again and emphasize the difference between:
1. selling a non MMF (settle T+3)
2. switching a non MMF into a MMF (settle T+1)
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Re: Capital Losses

Postby CROCKD » 29 Dec 2011 11:42

Well c'la vie.

Just got off the phone with TDWH. The answer is T+3.

I explained that I wanted to switch units of a TD mutual fund (Monthly Income) to a MM style fund (The new TD Investment savings account). I was told that the transaction involves selling the MI fund which settles in T+3 and buying the TD Invest. savings which is T+1. TDWH 'matches' them up. She then offered to switch me to a mutual fund specialist in Montreal. I quoted IdOp's post so this specialist after going away to consult came back and confirmed it is T+3 for the date i.e. 2012
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Re: Capital Losses

Postby IdOp » 29 Dec 2011 11:57

CROCKD wrote:I explained that I wanted to switch units of a TD mutual fund (Monthly Income) to a MM style fund (The new TD Investment savings account)

I think the last half of this sentence may be the problem. The TD HISA is not a mutual fund. TD mutual funds are securities offered by TDAM while the HISA is a deposit account probably offered by the Bank, even though it "trades like a money market mutual fund". I strongly suspect you cannot switch between the two because switches are only possible between mutual funds.

Digression: Why do I suspect that? I once tried to switch from Manulife Bank ISA to Manulife Trust ISA. The TD-W system accepted the order online, but it later was mysteriously cancelled and never traded. Again, these two ISAs are not mutual funds so it was not possible to switch. I had to re-group and sell one and buy the other.

Back on track: So what I think you must do CROCKD is switch from your monthly income fund to the TD Cdn Money Market fund. The latter is a mutual fund and can be switched to. That should settle the monthly income fund in T+1, but please confirm with TD-W. Forget the fact that the MMF pays peanuts of interest now if the point is to get a tax loss. You can always sell the MMF in a day or two and buy the TD HISA at the same time (both T+1).

I hope that will work.
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Re: Capital Losses

Postby CROCKD » 29 Dec 2011 13:49

IdOp I checked and the new HISA trades as a mutual fund like a MMF - see Skakespeare's thread. In any case I checked to see if I could switch from the TDMI fund to the TD MMF (not HISA) and was told exactly as I have reported. It is because one half of the transaction involves selling a T+3 fund even though it is called a switch.

In any case it is no big deal. I was trying to do some year end tax planning - should not have left it so late. But it can wait till next year.

The value of this forum is information and education.

It occurs to me that if you sell stock or mutual funds because in an emergency you need cash, you would have to wait three days for it - not that I ever envisage myself being in that position.
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