With the summer coming to an end, the fall is a time when many taxpayers look at opportunities to optimize their tax position. One of these strategies is calledTax Loss Selling. The strategy involves triggering a loss on a non-registered investment that’s worth less than its original cost. If an individual has capital gains that could result in taxes payable, a review of all of the investments that are losing money could be offset against these gains to reduce taxes payable.
Example: Any excess losses can be applied against losses from the past three tax years or carried forward to be used in future years. If you have a $10,000 capital gain from 2015 and realize in December that you have accumulated a loss of $6,000 on another investment, you can sell that second investment to trigger a loss resulting in a net capital gain of $4,000. Per the tax rules, 50% of that gain is taxable. One of the conditions of this rule is that the same stock cannot be repurchased for at least 30 days. The transaction must also be settled before year end.
Let me know if you have any questions on Personal Service Businesses or any other accounting, tax or Canada Revenue Agency related questions. I can be reached at ajaffer@arjcpa.ca or 905-629-7720
Ali Raza Jaffer, CPA, CGA, MBA, BComm
President, AR Jaffer Professional Corporation
Chartered Professional Accountant
(T) 905-629-7720 (F) 905-629-1947