: I’m looking at my portfolio and, like everybody else, I see a lot of red. Tell me what is wrong with the following: If I sell everything where I have a loss and then buy it back immediately I would be in the same position but I would have all those losses which I could apply to future gains for tax purposes over the next many years.If you sell a stock for a loss and immediately repurchase it, this is called a “superficial loss” and you cannot use it to offset capital gains.
For the capital loss to be allowed by the Canada Revenue Agency, you must wait at least 30 days before repurchasing the security. The restriction also applies to the 30 days before the sale, which means you can’t get around the superficial-loss rule by purchasing additional shares before selling your existing shares at a loss.
Imagine how you would feel if you sold a stock for the tax loss, only to watch it climb 30 per cent, 50 per cent or more while you waited to repurchase it. The benefit of the tax loss would be far outweighed by the lost opportunity to share in the stock’s recovery. There is, however, at least one strategy that investors can use to lock in a tax loss while still participating in a potential market rebound. Although you are not permitted to repurchase an identical security within 30 days, you are allowed to buy a similar stock and still claim the tax loss on the shares you sold. For example, if you sell shares of Bank of Montreal for a capital loss, you could immediately purchase shares of Royal Bank.
At the end of the 30-day period, you could sell the newly acquired security and repurchase the original stock you sold for a loss. This would allow you to use the capital loss for tax purposes. Remember that capital losses must first be applied against capital gains in the current calendar year. Any capital losses left over can be carried back up to three years or forward indefinitely to offset capital gains in those years.