Tax Loss Selling

Dec 08, 2018 | Nick Dodds


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As we enter the last month of 2018 I thought it would be timely to discuss the subject of tax loss selling.  This strategy would be applicable for those of you who have investments in a "Non-Registered" investment account.  This topic can be quite complex as there are several rules and conditions that need to be complied with.  I will highlight a couple of ideas for you to consider.  Click here to view the full article.  Should you decide to implement this strategy please consult with a qualified tax accountant as well as with your financial advisor.  

 

Let's start with the assumption that you have realized capital gains for the years 2015, 2016 or 2017 and you have unrealized tax losses for 2018.  One strategy is to sell your "losing" investment now.  This sale would establish an allowable taxable capital loss.  This loss can be carried back to offset against your realized taxable capital gains for 2015, 2016, or 2017.  This "carry back" may result in you getting a tax refund.  Remember that once you sell the security for a loss you would need to wait 30 days before you can buy it back and not be subject to the Superficial Tax Loss Rule.  At the time of sale ask your financial advisor to create a calculator which indicates that date that you are eligible to buy back the security.

 

Another example is where you may be looking to reduce exposure on some of your investments where the gains have been significant.  As you incur the gain you may want to set up some losses such that your tax liability is manageable.  The loss on the sale of a security can be used to offset the gain on the sale of your other securities.  Remember though that once you sell a security at a loss be mindful of the Superficial Tax Loss Rule (as outlined above).

 

There are several strategies pertaining to this topic.  As investors each of us have circumstances that are unique to us.  Therefore it is important for your accountant and financial advisor to have a thorough knowledge of your situation so that the right strategy can be implemented.