Superficial Loss Rule

The 61-day window

Capital losses are valuable: they offset gains and reduce your capital gains tax. The obvious trick would be to sell a losing investment, claim the loss, and buy it right back, keeping your portfolio unchanged while harvesting a tax break. The superficial loss rule is the CRA's answer to that trick, the Canadian cousin of the US "wash sale" rule.

The rule denies your loss when two conditions are both met: the identical property is purchased during the 61-day window running from 30 days before your sale through 30 days after it, and it is still owned at the end of that window. Note that the window reaches backward as well as forward: buying more shares three weeks before you dump the position at a loss triggers the rule just as surely as buying them back a week after.

Not just you: the affiliated list

Here is the distinctly Canadian twist. The repurchase does not have to be made by you. The rule also counts purchases by an affiliated person, which includes your spouse or common-law partner, an RRSP, RRIF, TFSA, or FHSA belonging to either of you, and a corporation you control. Selling in your taxable account while your spouse buys the same stock, or while your own automatic TFSA contribution buys the same fund, is caught exactly as if you had rebought it yourself.

The registered-account cases deserve special emphasis. If the repurchase happens inside a TFSA or RRSP, or if you transfer the losing position into one in kind, the loss is not merely deferred: it is destroyed permanently. There is no ACB inside a registered account to inherit it, so the tax value of the loss simply evaporates.

Where the denied loss goes

In the standard case, the rule defers your loss rather than destroying it. The denied amount is added to the [adjusted cost base](/dictionary/adjusted-cost-base) of the repurchased shares. Sell at a $5,000 loss, rebuy in your taxable account within the window, and your new shares carry an ACB $5,000 higher than what you paid. When you eventually sell for real, outside the window, the loss resurfaces as a smaller gain or bigger loss. Annoying, but not fatal.

The fatal versions are the registered-account ones above: a repurchase in your or your spouse's TFSA, RRSP, or similar account gives the denied loss nowhere to go, and it is gone for good. When a spouse rebuys in their taxable account, the loss is denied to you but added to their ACB, which is the mechanic some couples deliberately use to shift a loss between returns.

What counts as "identical property"

Identical property means the same security: the same stock, or the same fund, including the same ETF bought under any account or broker. Shares of two different companies are never identical, and, in the CRA's long-standing view, two index funds are generally identical only if they track the same index.

That last point powers the standard tax-loss harvesting workaround: sell a broad-market fund at a loss and immediately buy a similar but not identical fund tracking a different index. You stay invested in essentially the same market, the 61-day window runs without a repurchase of identical property, and the loss stands. The funds must genuinely differ; two products tracking the exact same index are offside no matter whose logo is on them.

One accidental trigger to watch: an automatic dividend reinvestment plan (DRIP) that buys even a fraction of a unit during the window counts as a purchase of identical property and can deny part of your loss.