Have you experienced a large capital gain in 2014? Sold some property, or some good, non-registered investments? If you can sell some poor-performing stocks before the end of 2014, it is possible to offset the gains with the losses. And, even better, the losses can then be carried back for three years against capital gains, and forward indefinitely, after being applied to the current year’s gains.
But don’t wait until December 31st to do this or it won’t work. You need to know the “settlement date” for the sale, which is the date it’s effective. This is normally at least three business days after the trading date. So, in 2014, the last trading date for Canadian publicly traded stocks is likely December 24th.
Again, this is the kind of tax planning manoeuvre that can be effective over multiple years. So, in your portfolio, if you have had a gain the previous three years, but have some stocks that have gone down in value, you could see a tax advantage by selling them.
But “superficial loss” rules state that you, or someone “affiliated” with you, can’t own the same investment again for another 30 days, before or after the sale. And of course, Murphy’s Law says on the 28th day that stock will triple in value. One option is to sell loser shares to a family member – but not your spouse. Children, for example, aren’t affiliated to you under the rules (even if they’re eating out of your fridge and you’re doing their laundry). So if Murphy’s law does come into effect, your child could get the gain if the stocks increase in value.
George E. Dube, CPA, CAcapital gains