Superficial Loss - Clarification

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Mouly
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Superficial Loss - Clarification

Post by Mouly » 06 Sep 2017 09:47

I goofed up caused myself a superficial loss. I estimate the extra tax I will have to pay because of it is $2.75 (so it's REALLY superficial!).

I don't want to go thru any effort tracking this and the potential future PITA using it later on, so I'm happy just to forget about it.

Does that mean I just don't bother to report the sale on my next tax return? Or do I report it and somehow override the loss to $0?

Second question:
Do I really have a superficial loss? The other recent purchase of what I just sold was into an RESP. (If anyone is wondering why I am selling something in one account but putting into an RESP, it is because I am rebalancing).

Third question:
Is superficial loss triggered only by a purchase of the same item? I used to think it also meant it could also be triggered by just holding the same item in another account, but I think now I may have misunderstood that.

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Re: Superficial Loss - Clarification

Post by Joebaba » 06 Sep 2017 12:03

Hey Mouly,

This post at AdjustedCostBase.ca touches on questions 1 and 2 of your post.

https://www.adjustedcostbase.ca/blog/wh ... loss-rule/

To your first question, go down to the comments after his post – the comment on April 26, 2016 at 3:38 PM, and he says CRA isn’t clear, but he suggests simply not reporting the loss at all.

To your second question, he mentions in his post….
“The superficial loss rule will apply when a sale outside of a registered account coincides with a purchase of identical property inside a registered account within the 61-day period. However, in these cases, the capital loss is permanently forfeited and cannot be added to the ACB of the non-registered shares. “

To your third question, I don’t really understand your question. If the post above doesn’t touch on it, maybe pose the question here again with an example.

Joe

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IdOp
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Re: Superficial Loss - Clarification

Post by IdOp » 06 Sep 2017 12:23

I would definitely report the sale. The reason is that CRA will be informed of the sale, and if you don't report it, they may think you forgot about it, or that you're trying to hide something. Either way they may come after you for information, so you might as well report it. If it is a superficial loss, then report it with the ACB being equal to the net proceeds of disposition that you got (CRA knows the latter too), so capital gain will be zero. Simple. Hope that helps.

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adrian2
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Re: Superficial Loss - Clarification

Post by adrian2 » 06 Sep 2017 13:06

IdOp wrote:
06 Sep 2017 12:23
I would definitely report the sale.
If you're using tax software, the actual file being transmitted to CRA contains only the totals, so they apparently don't care about that level of detail (breaking down of the capital gain/loss for each security).
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Re: Superficial Loss - Clarification

Post by adrian2 » 06 Sep 2017 13:10

Mouly wrote:
06 Sep 2017 09:47
Third question:
Is superficial loss triggered only by a purchase of the same item? I used to think it also meant it could also be triggered by just holding the same item in another account, but I think now I may have misunderstood that.
There is no superficial loss if you sell a security at a loss, while simultaneously holding the same security in a different type of account, provided that the latter was purchased more than 30 days before the sale.

Please note that, for cost base purposes, all non registered accounts having the same owner should be commingled.
E.g. if you hold MFC shares in a non-registered account at TD Waterhouse, as well as in a non-registered account at BMO Investor Line, the cost base should be amalgamated across the accounts.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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AltaRed
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Re: Superficial Loss - Clarification

Post by AltaRed » 06 Sep 2017 14:12

adrian2 wrote:
06 Sep 2017 13:10
Please note that, for cost base purposes, all non registered accounts having the same owner should be commingled.
E.g. if you hold MFC shares in a non-registered account at TD Waterhouse, as well as in a non-registered account at BMO Investor Line, the cost base should be amalgamated across the accounts.
I think you might have meant "must" FWIW, I never hold the same security in 2 places... partly to avoid 'forgetting' to amalgamate ACB, etc. I am getting forgetful in my old age.
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Re: Superficial Loss - Clarification

Post by IdOp » 06 Sep 2017 16:46

adrian2 wrote:
06 Sep 2017 13:06
If you're using tax software, the actual file being transmitted to CRA contains only the totals, so they apparently don't care about that level of detail (breaking down of the capital gain/loss for each security).
Does the file, among the totals it contains, contain the total for proceeds of all dispositions? If so, then I'd think it's a good idea to have that sale in there.

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adrian2
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Re: Superficial Loss - Clarification

Post by adrian2 » 06 Sep 2017 16:56

AltaRed wrote:
06 Sep 2017 14:12
adrian2 wrote:
06 Sep 2017 13:10
Please note that, for cost base purposes, all non registered accounts having the same owner should be commingled.
E.g. if you hold MFC shares in a non-registered account at TD Waterhouse, as well as in a non-registered account at BMO Investor Line, the cost base should be amalgamated across the accounts.
I think you might have meant "must" FWIW, I never hold the same security in 2 places... partly to avoid 'forgetting' to amalgamate ACB, etc. I am getting forgetful in my old age.
Right you are.
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adrian2
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Re: Superficial Loss - Clarification

Post by adrian2 » 06 Sep 2017 17:00

IdOp wrote:
06 Sep 2017 16:46
adrian2 wrote:
06 Sep 2017 13:06
If you're using tax software, the actual file being transmitted to CRA contains only the totals, so they apparently don't care about that level of detail (breaking down of the capital gain/loss for each security).
Does the file, among the totals it contains, contain the total for proceeds of all dispositions? If so, then I'd think it's a good idea to have that sale in there.
Overall, it's exactly the same end result if you report:
Proceeds of disposition = $1,100
Adjusted cost base = $1,000
vs.
Proceeds of disposition = $11,100
Adjusted cost base = $11,000

I really don't think CRA cares / matches anything with the intermediate numbers, they only want to get their pound of flesh.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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Re: Superficial Loss - Clarification

Post by IdOp » 06 Sep 2017 18:07

Agreed the total capital gain is the same, but if the tax file contains the total proceeds then CRA might in some cases check them to be sure nothing is missing. But we don't really know for sure. It would have been clearer if I'd written: "Be as transparent as your method of filing permits. Don't treat a superficial loss differently than any other sale in your reporting."

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Re: Superficial Loss - Clarification

Post by Glen » 07 Sep 2017 17:06

adrian2 wrote:
06 Sep 2017 13:10

There is no superficial loss if you sell a security at a loss, while simultaneously holding the same security in a different type of account, provided that the latter was purchased more than 30 days before the sale.
If I sell half of a holding at a loss I can claim a capital loss that year? That would be good for me. I've been adjusting the ACB and delaying claiming the loss in the belief that it was superficial.

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adrian2
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Re: Superficial Loss - Clarification

Post by adrian2 » 07 Sep 2017 18:50

Glen wrote:
07 Sep 2017 17:06
adrian2 wrote:
06 Sep 2017 13:10

There is no superficial loss if you sell a security at a loss, while simultaneously holding the same security in a different type of account, provided that the latter was purchased more than 30 days before the sale.
If I sell half of a holding at a loss I can claim a capital loss that year? That would be good for me. I've been adjusting the ACB and delaying claiming the loss in the belief that it was superficial.
If your holdings were purchased more than 30 days before the day of the sale, and you don't purchase more for at least 30 days after the date of the sale, there's no superficial loss.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]

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Re: Superficial Loss - Clarification

Post by gobsmack » 08 Sep 2017 10:17

Glen wrote:
07 Sep 2017 17:06
If I sell half of a holding at a loss I can claim a capital loss that year? That would be good for me. I've been adjusting the ACB and delaying claiming the loss in the belief that it was superficial.
This article explains how the rule works: https://www.adjustedcostbase.ca/blog/wh ... loss-rule/

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