Canada's superficial loss rule: the 61-day window with worked examples

How Canada's superficial loss rule works: the 61-day window, identical property, spouses, corporations and TFSAs, ACB adjustments and three worked examples.

Selling a losing position near year-end to use the capital loss is common. So is buying it back a week later. In Canada, doing both can cost you the deduction. The superficial loss rule is short, mechanical and easy to trip by accident, so this guide works through it with dates and numbers. It is general information, not tax advice: the rules change, and your situation may differ, so check with a qualified tax professional.

It assumes your trades are on capital account. If your trading amounts to a business, different rules apply; see the Canada topic hub.

The rule in plain terms

The CRA's capital gains guide, T4037, says a superficial loss can occur when you dispose of capital property for a loss and both of these are true:

1. You, or a person connected with you in the way the Income Tax Act defines, buys, or has a right to buy, the same or identical property (the "substituted property") during the period that starts 30 calendar days before the sale and ends 30 calendar days after it.
2. You, or such a connected person, still owns, or has a right to buy, that substituted property 30 calendar days after the sale.

If both are met, you cannot deduct the loss that year. If you are the one who acquired the substituted property, you can usually add the denied loss to its adjusted cost base (ACB), so you get the benefit later, when you sell the new shares. The CRA's capital losses page covers the same rule.

Two details matter for traders. First, "has a right to buy" means a call option or similar right on the same stock can count, not just shares. Second, the guide lists exceptions, such as a loss from the expiry of an option, a deemed sale on becoming or ceasing to be a resident of Canada, or a deemed sale on death. An ordinary sale and buyback in a brokerage account is not on that list.

The 61-day window

The window is 30 days before the sale, the day of the sale, and 30 days after it: 61 calendar days in total. Weekends and holidays count. Purchases before the sale count too, which surprises people who "average down" and then sell the original lot.

Illustrative timeline for a sale on September 2

Date	Day	What a purchase of identical property here means
August 2	-31	Outside the window
August 3	-30	First day of the window
September 2	0	Sale at a loss
October 2	+30	Last day of the window; ownership is tested at the end of the period
October 3	+31	First day a repurchase falls outside the window

Count days on a calendar and leave a margin of a few days; trade and settlement dates differ, and a buffer covers any doubt about which applies.

What counts as identical property

T4037 says properties are identical if each is the same as all the others, and gives shares of the same class of a corporation's capital stock, or units of the same mutual fund trust, as the most common examples. The CRA's archived bulletin IT-387R2 describes identical properties as the same in all material respects, so that a buyer would have no preference for one over the other, and says the determination is a question of fact.

That last phrase is the key. There is no official list of safe substitutes. Some practical consequences:

• The same share class bought on a different exchange, or in a different currency, is still the same share class.
• Two funds that track the same index from different providers are a grey area. The answer depends on the facts, so get advice before relying on a "near twin".
• Buying call options on the same stock, or selling puts that are assigned within the window, can bring you inside the rule. If you sell options against shares, the covered calls guide explains how assignment works.

Connected persons, including your registered accounts

The rule reaches beyond your own account. T4037 gives examples of persons who count (it uses a specific legal term for them), including you and your spouse or common-law partner, and you and a corporation controlled by you or your spouse or common-law partner. So a sale in your account followed by your spouse buying the same shares within the window can make your loss superficial.

Registered accounts are where the most damage happens. The CRA has stated in its published views that it treats a purchase of the identical property inside your own TFSA or RRSP within the window as triggering the rule. The problem is what follows. The ACB adjustment only helps if there is a taxable cost base to add the loss to. Gains and losses inside a TFSA or RRSP are not reported on your return, so the denied loss has nowhere useful to go. In practice it is lost permanently.

A related trap: contributing a losing position to a TFSA "in kind" does not create a deductible loss either. The CRA's TFSA contribution page says an in-kind contribution is treated as disposed of at fair market value, and if that value is less than your cost, you cannot claim the capital loss.

Three illustrative examples

All figures are illustrative. Each example starts the same way: 200 shares of a company bought at $50.00, plus a $10 commission, for an ACB of $10,010. They are sold on September 2 at $40.00, less a $10 commission, for net proceeds of $7,990. The loss before the rule is $10,010 - $7,990 = $2,020.

Example 1: a clean loss

Nobody, including your spouse, your corporation, your TFSA or your RRSP, buys the same shares or options on them between August 3 and October 2. The $2,020 capital loss stands. On the CRA's capital losses page the inclusion rate for 2025 is 50%, which would make the allowable capital loss $1,010; check the current rate for the year you file.

Example 2: loss denied and added to ACB

On September 20 you buy 200 shares back at $38.00 plus $10, a cost of $7,610, and still hold them on October 2. The $2,020 loss is superficial and cannot be deducted. It is added to the new shares' ACB: $7,610 + $2,020 = $9,630, or $48.15 per share.

Months later you sell those 200 shares at $45.00, net $8,990. Your capital loss then is $9,630 - $8,990 = $640. Without the adjustment you would have reported a $1,380 gain. The loss was deferred to a later year, not erased.

Partial repurchase, same facts but you buy back only 50 shares in the window and hold them at the end of it. A commonly used method applies the loss pro rata: the smallest of shares sold (200), shares acquired in the window (50) and shares held at the end of the window (50), divided by shares sold. That is 50 / 200 = 25%, so $505 is denied and $1,515 is deductible. The $505 is added to the ACB of the 50 new shares. Confirm complex share counts with a qualified tax professional.

Example 3: repurchase in a TFSA

You sell in your non-registered account on September 2 and buy 200 of the same shares in your TFSA on September 10. Treated as a superficial loss, the $2,020 is denied. There is no taxable ACB in the TFSA to add it to, so you never get the deduction.

How traders avoid tripping it

• Wait it out. Repurchase no earlier than day 31 after the sale, and check that you bought nothing identical in the 30 days before it.
• Use a substitute that is genuinely different. Remember that "identical" is a question of fact. The more similar the substitute, the higher the risk.
• Check the whole household. Your spouse's accounts, a corporation you control, and your own TFSA and RRSP all count. Automatic purchases, dividend reinvestment and pre-authorised contributions can buy shares without you noticing.
• Watch options. Long calls on the same stock, and short puts that could be assigned, are rights or acquisitions that can bring you inside the window.

Common mistakes

• Counting only the 30 days after the sale and forgetting the 30 days before.
• Selling in a taxable account and rebuying in a TFSA or RRSP, which turns a deferral into a permanent loss.
• Assuming a small dividend reinvestment does not count. It can.
• Reporting the loss on the return anyway and forgetting to adjust the new shares' ACB, which distorts the later gain or loss.
• Ignoring commissions, which are part of the ACB and reduce your proceeds.

Record-keeping checklist

For every sale at a loss, record:

1. The security, share class and exchange.
2. Trade date, settlement date, quantity, price and commission for the sale.
3. Every purchase of the same security from 30 days before to 30 days after, across all your accounts and those of connected persons.
4. Whether you held any of it at the end of the window, and how many shares.
5. The denied amount, if any, and the revised ACB of the substituted shares.

A trade journal makes this much easier; the trade journal template can take an extra "tax lot" column. The CRA generally asks you to keep required records for six years from the end of the tax year they relate to. For capital property, keep purchase records for as long as you hold the position and then for that period after the sale.

Rules change. Check T4037 for the year you file, and ask a qualified tax professional about your own accounts.

Examples use round, illustrative numbers and are not actual trades or results. Education only — not investment, tax or legal advice.

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