Superficial Loss Rule: A denied capital loss when the same security is repurchased within 30 days before or after the sale by the holder or an affiliated person.

Superficial Loss Rule

A denied capital loss when the same security is repurchased within 30 days before or after the sale by the holder or an affiliated person.

Definition

Under Income Tax Act s.54, a capital loss is deemed a superficial loss - and is disallowed in the current year - if the taxpayer or an affiliated person (spouse, controlled corporation) acquires the same or identical property within 30 days before or after the disposition. The disallowed loss is added to the ACB of the repurchased shares, effectively deferring rather than permanently denying the loss. The rule prevents investors from crystallizing losses for tax purposes while maintaining their economic position in the security. A wash sale triggered by spousal purchase is a common exam scenario.

Source

Income Tax Act s.54 (definition of superficial loss); ITA s.40(2)(g)(i)

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Superficial Loss Rule

Definition

Source

Related terms in Tax and Accounts

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