§ Explainer · Tax
Superficial loss rule
What this is
The CRA rule that DENIES your capital loss — and how to avoid it
Tax-loss selling is a legit year-end move: sell a losing position to crystallize a capital loss, use it to offset gains. But if you buy back the same security within 30 days, CRA denies the loss. Knowing the rule keeps you out of trouble.
- ·You own a stock at a $5,000 loss. Sell in December to claim the loss.
- ·If you (or your spouse, or a corp you control, or your RRSP/TFSA) buy back the same security between 30 days BEFORE and 30 days AFTER the sale = superficial loss. Denied.
- ·Workaround: wait 31+ days OR buy a SIMILAR but not identical security (XIU vs ZCN both track TSX 60 — different securities).
✗ What triggers the rule
- You sell at a loss
- You (or affiliated party) buy the SAME security within 30 days before/after
- Affiliated parties include spouse, dependent kids, controlled corps, your own RRSP/TFSA/FHSA
✓ How to claim the loss anyway
- Wait 31 days before buying back. Simplest, market timing risk.
- Buy a similar-but-not-identical ETF. XIU → ZCN; XUU → VFV; ZSP → XSP. Same exposure, different security.
- Move to a different account. Sell in non-reg, buy in TFSA. WAIT — this counts as the SAME taxpayer; still superficial. Doesn't work.
What happens if the rule applies
The loss is DENIED on this year's return. Instead, it's added to the cost base of the replacement shares. You eventually get the loss back when you sell those replacement shares (without re-triggering the rule).
Educational. Not financial advice. CRA examines: same CUSIP, same issuer, same class of share. 'Similar' funds (different MER, slightly different index) are usually OK but check with a CPA before relying on it.