Superficial Losses And Stop Losses

Click HERE for a discussion on the problem of Superficial Losses and HERE for a discussion of Stop Losses.

There are some tax planning strategies to avoid the Superficial Loss and Stop loss problems while obtaining some of the benefit from realizing losses.

1. The loss rules kick in when a purchase is made 30 days before or after the disposition of the property in question. To avoid the problem, purchase 31 days before or after the disposition of the property in question.

2. Trusts may not be affiliated persons, therefore transfers to a spousal trust is not necessarily caught by the superficial loss rules, however, transfers to your spouse are.

3. Children, parents and siblings are by definition not affiliated persons. So transfers to them will not necessarily be caught by the superficial loss rules. Additionally, corporations controlled by children, parents, and siblings are also not affiliated. Be careful of other problems such as attribution HERE.

4. Dispositions from a corporation to an RRSP in which the shareholder is an annuitant is not necessarily caught by the superficial loss rules as an RRSP is a trust and is not within the affiliated person definition. However, if the shareholder-annuitant disposed of the property to the RRSP, the loss will be disallowed.

Careful planning with a Chartered Accountant is warranted. Contact Keith Anderson CA at (780) 447-5830 if you need advice. 

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