Search
Search for an ETF or holding
Search for an ETF or holding
Updated 2mo ago.
Updated 2mo ago.
A superficial loss occurs when you sell an investment at a loss and you (or an affiliated person, such as your spouse or a corporation you control) repurchase the same or identical investment within 30 days before or after the sale. In this case, the CRA denies the capital loss deduction. The denied loss is added to the adjusted cost base (ACB) of the repurchased investment.
You hold 100 units of VFV.TO (Vanguard S&P 500 Index ETF) purchased at $100 each. The price drops to $80. You sell to claim a $2,000 capital loss. But 15 days later, you repurchase VFV.TO at $82. This is a superficial loss: the $2,000 loss is denied. However, your new ACB will be $102 per unit ($82 + $20 denied loss). If you wanted to harvest the loss while staying exposed to the S&P 500, you could have bought ZSP.TO (BMO S&P 500 Index ETF) instead — a similar but not "identical" ETF according to the CRA.
The superficial loss rule is a common trap for investors practicing tax-loss harvesting. If you sell an ETF at a loss to reduce your taxable capital gains, you must wait 31 days before repurchasing the same ETF, or buy a similar but not identical ETF (e.g., switch from VFV.TO to ZSP.TO). The rule also applies to purchases made by your spouse or in another account (RRSP, TFSA). The loss is not permanently lost — it is added to the ACB — but it is deferred in time.