Many of our clients will realize large capital gains this year. Perhaps your portfolio has done well and you’ve made investment changes or withdrawals? Maybe you’ve sold an investment property or company?
If you’ve realized a gain this year, you may want to consider ways of reducing your capital gains tax before year end. One way to do this is to sell an investment that is in a loss position in your non-registered account. This is known as tax-loss selling, or tax harvesting, and can be done in three easy steps:
- First, identify a capital gain you wish to reduce tax on. This can be a gain that has occurred in the current tax year, will occur in the future, or has occurred in one of the last three years.
- Calculate the total capital gains you will need to reduce tax on. Remember: while you can carry capital losses back three years or forward indefinitely, tax law requires you to first apply your capital loss against capital gains that have occurred in the same year.
- Sell an investment in a loss position. This generally means selling an investment that has a present value of less than what you paid for it.
What if you want to crystallize the capital loss and reacquire the investment shortly after? Beware of the superficial loss rule. This rule stipulates that if you, or an affiliated person, acquire the investment either 30 days before or 30 days after you’ve sold it to create a capital loss, the loss will be deemed nil.
Don’t delay - December 24th is the last trading day for tax loss selling in 2015.
Please let us know if you’d like to receive our three page education article on Tax Loss Selling.
Jeremy Ruban and Trevor Stark, in partnership with the Bradet-Simpson Investment Group at Richardson GMP, work hard to develop focused strategies to meet the unique needs of today’s investor. Richardson GMP is Canada’s leading independent wealth management firm, supported by expert tax and estate planning professionals.
Please contact us at (204) 953-7850 or email Team.Bradet-Simpson@RichardsonGMP.com. You can also visit us online at www.Bradet-Simpson.com
The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances. Before acting on any of the above, please seek individual financial advice based on your personal circumstances. Richardson GMP Limited is a member of Canadian Investor Protection Fund. Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.