Superficial Loss Rule

The superficial loss rule is a Canadian tax rule that prevents you from claiming a capital loss if you buy back the same (or identical) investment within 30 calendar days before or after the sale. The CRA put this rule in place to stop people from selling an investment just to claim the tax loss and then immediately buying it back.

How the 30-day window works

The rule covers a 61-day window: 30 days before the sale, the day of the sale, and 30 days after. If you or your spouse (or a corporation you control) buys the same investment anywhere in that window, the loss is denied.

The denied loss isn’t gone forever. It gets added to the cost base of the repurchased shares, which means you’ll benefit from it later when you eventually sell for good. But you lose the ability to use it right away.

What counts as “identical”

The CRA considers properties identical if they’re the same security. Selling shares of TD Bank and buying them back would trigger the rule. Selling shares of TD Bank and buying shares of Royal Bank would not, because they’re different companies.

For ETFs, selling one S&P 500 ETF and buying a different S&P 500 ETF from another provider is generally considered acceptable, though the CRA hasn’t drawn a perfectly clear line on this.

How to avoid it

If you’re selling to harvest a tax loss, either wait 31 days before repurchasing the same investment, or buy something similar but not identical right away. Just be aware of the window and plan accordingly. Our non-registered account guide covers this and other tax strategies for taxable accounts.

Example

You bought a Canadian equity ETF for $10,000 and it’s now worth $7,500. You sell it on March 10 to claim the $2,500 capital loss. On March 25, you buy the same ETF back. Because the repurchase happened within 30 days, the CRA denies the $2,500 loss. The loss gets added to the cost base of the new shares instead, so you’ll only benefit from it when you eventually sell again.