The Superficial Loss Rule: A Complete Guide for Canadian Investors

What is a superficial loss?

A superficial loss is a capital loss that the CRA disallows because the loss-generating security was reacquired too soon. CRA describes the window as 30 days before the sale, the sale day itself, and 30 days after when you or an affiliated person buys or has a right to buy the same or identical property.

Two separate provisions do the work, and it is worth knowing both. ITA s. 40(2)(g)(i) deems the loss to be nil. ITA s. 53(1)(f) then adds that denied amount to the adjusted cost base (ACB) of the replacement property. If ACB itself is new to you, start with what adjusted cost base is and how to calculate it.

Together they defer the loss rather than destroy it. The higher ACB reduces your capital gain when the replacement shares are eventually sold, so you get the loss back later. The exception is the TFSA/RRSP trap described below, where the add-back lands inside a registered account and the loss is permanently lost.

The CRA 30-day rule in plain terms

Investors call it the 30-day rule. CRA's capital gains guide, T4037, states it as two conditions that must both be met, and the second one is the part most people forget:

1. You, or a person affiliated with you, buys or has a right to buy the same or identical property during the period that starts 30 calendar days before the sale and ends 30 calendar days after it.
2. You, or that affiliated person, still owns or has a right to buy that property 30 calendar days after the sale.

Both conditions come from the definition of "superficial loss" in ITA s. 54. The days are calendar days, not trading days, so weekends and holidays count toward the 30. Because the second condition is tested at the end of the window, a rebuy that you sell again before day 30, leaving nothing held by you or an affiliated person at that point, does not make the original loss superficial.

The 61-day window

The window is measured from the disposition date. For publicly traded securities, CRA technical interpretation 2012-0468931C6 says the disposition occurs on settlement, when the seller is entitled to the proceeds. If your broker file does not include settlement dates, ActiveACB falls back to the trade date for that leg and flags cases near a boundary.

The window is:

• 30 calendar days before the sale's settlement date
• The settlement date itself
• 30 calendar days after the sale's settlement date

Replacement purchases are checked on the same settlement-date basis. That keeps the sale and acquisition on one clock instead of mixing trade dates for one leg with settlement dates for the other.

Identical property

The repurchased security must be "identical property" to trigger the rule. In practice this means:

• Same security: Shares of the same corporation, ETF units of the same fund, or other property with the same CUSIP or identifier. If you sell XIU and buy XIC, these are different securities, so there is no superficial loss even though both track the TSX.
• Two funds tracking the same index: CRA's administrative position is that two index funds from different providers that track the same index are generally identical property, while funds tracking different indexes generally are not. Selling XIU and buying XIC is not caught, because the S&P/TSX 60 and the S&P/TSX Capped Composite are different indexes. Selling one S&P 500 ETF and buying a different provider's S&P 500 ETF is a much closer call and is far more likely to be caught.
• Different series of the same fund: A fee difference that affects price does not stop two otherwise identical properties from being identical, so switching between series of the same fund is generally caught. CRA has published no ruling on a mutual fund series against the ETF series of the same fund, so treat that particular case as unresolved and fact dependent.
• Call options, and the part most explanations miss: The definition in ITA s. 54 has two limbs. The first asks whether you acquired property that is, or is identical to, what you sold. The second asks whether, at the end of the window, you or an affiliated person "owns or had a right to acquire the substituted property". Under the definition's closing words, a right to acquire the shares is deemed identical property, so a call bought in the window is substituted property. If you still hold it at the end of the window, the second limb is met too.
• Adjusted option contracts: Split-adjusted call contracts are supported when you enter the adjusted root and deliverable in the corporate-action builder.
• Put options are not identical property. Buying a put on the same stock you sold at a loss does not trigger the rule, because a put gives you the right to sell, not acquire.

Affiliated persons

The repurchase that triggers the rule does not have to be by you personally. It counts if the repurchase is by any "affiliated person" under ITA s. 251.1:

• You (in the same or a different account)
• Your spouse or common-law partner
• A corporation controlled by you or your spouse
• Your TFSA
• Your RRSP or RRIF
• Your FHSA

CRA's guide lists a spouse or common-law partner, a corporation controlled by either of you, a partnership and its majority-interest partner, and a trust and its majority-interest beneficiary, meaning a beneficiary entitled to a majority of the trust's income or capital. A registered plan held at a broker is normally caught under that last item, because the plan is a trust of which you are the beneficiary. The statutory list is in ITA s. 251.1.

This is the rule that catches most Canadian investors off guard. Selling at a loss in a non-registered account and rebuying in your TFSA within the window is a superficial loss, even though those are completely separate accounts at different tax treatment levels.

Just as useful is knowing who is not affiliated. These relatives fall outside s. 251.1, so a purchase by any of them does not deny your loss:

• Your parents and grandparents
• Your children and grandchildren
• Your siblings

That surprises people in both directions. An adult child buying the same security the day after you sold it at a loss does nothing to your claim. Your spouse buying it in an account you have never touched denies it.

The three-limiter formula

Not all of the loss is necessarily denied. The denied amount is the smallest of three numbers:

In the most common case, where you sell all of your shares and rebuy the same quantity, all three limiters are equal and the entire loss is denied. But if you only bought back half the shares, only half the loss is denied.

Superficial loss worked examples

Start with a full denial. You sell 100 shares of XYZ for $1,500.00 when their ACB is $2,000.00, so the capital loss is $500.00. You buy 100 shares of XYZ ten days later and still hold them 30 days after the sale. The denied shares are min(100 bought, 100 still held, 100 sold) = 100, so the full $500.00 loss is denied and added to the ACB of the replacement shares.

Now make it partial. You sell 200 shares for a total loss of $800.00. You buy 60 replacement shares during the window and still hold those 60 at the end of the window. The denied shares are min(60 bought, 60 still held, 200 sold) = 60. The denied loss is 60 / 200 x $800.00 = $240.00, and the remaining $560.00 loss is allowed.

Finally, move the replacement into a registered account. You sell 100 shares in a taxable account for a $700.00 loss, then buy 100 identical shares in your TFSA inside the window and still hold them. The loss is superficial, but there is no taxable ACB inside the TFSA to increase. The $700.00 loss is permanently denied.

Superficial loss day trading

Day trading makes the superficial loss rule harder because every loss sale has its own 61-day window. A same-day or next-day rebuy can trigger the rule just as easily as a December tax-loss sale, and a purchase made before the sale can count if it falls inside the 30 days before the sale.

For investors reporting trades on capital account, the three-limiter formula still controls the denied amount. Frequent trading does not make every loss disappear, but it can move losses forward repeatedly when replacement shares are still held at the end of each sale's window.

If your activity is on income account as a trading business, the superficial loss rule does not apply to you at all. The rule operates only on capital losses. A trader on income account holds securities as business inventory rather than capital property, so there is no capital loss for s. 40(2)(g)(i) to deny. Those losses are ordinary business losses, deductible in full against all income in the year they arise.

That cuts both ways. Income account means no superficial loss deferral and no 61-day window to track, but it also means the entire gain is taxed rather than half of it. Which treatment applies is a question of fact rather than a choice you make at filing time. CRA weighs the frequency of your transactions, how long you hold, your knowledge of the market, how much time you spend on it, whether you trade on margin, and whether the activity looks like a business. We set the factors out in full in our guide to whether a T5008 is capital gains or investment income. The superficial loss calculation on this page is for capital property reporting.

The TFSA/RRSP trap, a permanent loss

When the replacement purchase is inside a registered account (TFSA, RRSP, RRIF, FHSA), the denied loss is permanently lost, not deferred.

In a normal superficial loss, the denied amount is added to the ACB of the replacement shares in the non-registered account. This defers the loss: when you eventually sell those shares, the higher ACB reduces your capital gain, giving you credit for the originally denied loss.

But when the replacement is in a TFSA or RRSP, there is no ACB to add the denied amount to. The registered account's internal cost does not affect your tax position at all. The denied loss disappears permanently.

ActiveACB flags this separately from regular superficial losses in the warnings section of your report.

December to January look-forward

The 30-day after-sale window does not stop at December 31. If you sell at a loss in late December, the settlement-based window can extend well into January of the following year.

This means you cannot confirm a December loss is allowed until the full settlement-date window has closed. If you rebuy in January within the window, the December loss is denied, even though the sale and the rebuy are in different tax years.

ActiveACB scans across the tax-year boundary when processing your files and correctly denies losses where the rebuy falls in January.

What to do if you already triggered it

Triggering the rule is not a filing disaster. It changes where the loss lives. Work through it in this order.

1. Do not deduct the denied amount this year. CRA's guide is explicit that a superficial loss cannot be deducted in the year it arises, and ITA s. 40(2)(g)(i) deems the loss to be nil to the extent that it is superficial. Use the three-limiter formula above to find that extent, because a partial rebuy denies only part of the loss.
2. Add the denied amount to the ACB of the replacement shares. Under ITA s. 53(1)(f) the add-back belongs to whoever acquired the substituted property. If you rebought in your own taxable account, your ACB rises. If your spouse bought the shares, the denied loss goes to your spouse's ACB, not yours. CRA's guide says the same thing: the person who acquires the substituted property can usually add the superficial loss to its ACB, which lowers their eventual gain or raises their eventual loss.
3. If the replacement sits in a TFSA, RRSP, RRIF or FHSA, accept that the loss is gone. There is no taxable ACB inside a registered plan to add it to.
4. Report the disposition on Schedule 3 anyway. Schedule 3 has no box for superficial losses. Report the disposition, but leave the denied portion out of the loss you claim. Tax software usually asks whether a loss is superficial and handles it for you. On a paper return, note beside the row that part of the loss is superficial and keep a worksheet showing the real proceeds, ACB, outlays, the denied amount, and the add-back under s. 53(1)(f). The denied amount then reappears on its own, as a smaller gain or a larger loss, when the replacement shares are sold.
5. Do not expect the T5008 to help. Your broker's slip reports proceeds and sometimes a cost figure for each disposition. It does not apply the superficial loss rule, and no broker can see your spouse's account or another institution's TFSA. Our guide to T5008 box 20 and box 21 explains what the slip's numbers actually are.

One thing the denied amount is not: a net capital loss. Net capital losses are the allowed losses that exceed your taxable capital gains for the year, and CRA lets you carry those back three years or forward indefinitely. A superficial loss never reaches that stage. It waits inside the ACB of the replacement shares until they are sold.

Superficial loss vs the US wash sale rule

Canadians with a US brokerage account, or who read American tax content, often assume the two rules are the same. They rhyme, but the differences matter.

The Canadian column is drawn from Guide T4037 and ITA s. 54. The American column is drawn from IRS Publication 550. The practical lesson is that the Canadian rule is worded more narrowly on the property and more widely on the people, so a trade that is clean under one rule can be caught under the other. If you file in both countries, test the trade against each rule separately.

A five-question self-check before you claim a loss

• Did I, my spouse, a corporation either of us controls, or any of my registered plans buy the same or identical security in the 30 calendar days before the sale?
• Did any of us buy it, or acquire a call option on it, in the 30 calendar days after the sale?
• Does any of us still hold it 30 days after the sale?
• Did a dividend reinvestment plan or an automatic contribution buy it for me inside the window?
• If the answer to any of these is yes, how many shares were rebought and still held compared with the number sold? That fraction is the part of the loss that is denied.

Three yes answers to the first three questions, in any combination that leaves shares held on day 30, means at least part of the loss is superficial. Everything on this page from the three-limiter formula down tells you how much and where it goes.

Dividend reinvestment can trigger it without you noticing

Nothing in ITA s. 54 requires the repurchase to be deliberate. A dividend reinvestment plan that buys identical units inside the window is an acquisition of substituted property in exactly the same way a manual rebuy is.

So a quarterly distribution reinvested three weeks after you sold at a loss can deny part of that loss under the three-limiter formula, even though you never placed an order. Because DRIP purchases are usually small, the denied fraction is usually small too, but it is rarely zero. This follows from the definition itself rather than from any DRIP-specific CRA ruling. Our guide to reinvested dividends and ACB covers how those purchases affect your cost base more broadly.

When the rule does not apply

The definition in ITA s. 54 carries a list of exclusions, and CRA's guide lists the common ones in plain language. A few situations fall outside the rule entirely:

• Death. Paragraph (c) of the s. 54 definition expressly excludes deemed dispositions under s. 70, so a loss triggered on death is not a superficial loss. Other stop-loss rules may still apply.
• Emigration. Deemed dispositions under s. 128.1 are excluded on the same basis.
• An option that simply expires. Expiry is excluded from the definition.
• A change in use. A deemed disposition under s. 45(1), for example when a rental property becomes your home, is excluded.
• Becoming or ceasing to be exempt from tax. If you become or cease to be exempt from income tax within 30 days after the disposition, the loss is not superficial.
• Property appropriated by a shareholder on a winding-up. Dispositions covered by s. 69(5) are excluded.
• Income account. There is no capital loss to deny, as described above.
• Moving between your own non-registered accounts. Transferring a position from one of your taxable accounts to another is not a disposition at all, because beneficial ownership does not change. Moving it into a registered account is a very different matter.
• Most dispositions between corporations. A corporation you or your spouse controls is affiliated, but a loss on a disposition between affiliated corporations is generally handled by the loss suspension rule in ITA s. 40(3.3) and s. 40(3.4) rather than by the superficial loss definition. The loss is suspended until the property leaves the affiliated group, rather than added to anyone's ACB.

How ActiveACB handles superficial losses automatically

Upload your IBKR Flex Query XML, Questrade Activity Report XLSX, Wealthsimple activity CSV, or any other broker's CSV or XLSX via the column mapper, and the engine does all of this for every sale in your history:

• Scans the full 61-day window around every loss-generating sale
• Identifies repurchases in all uploaded accounts, including registered rows inside a single all-accounts export
• Applies the three-limiter formula to calculate the exact denied amount
• Adds the denied amount to the ACB of the replacement shares
• Flags TFSA/RRSP replacements where the denied loss is permanent
• Handles December to January look-forwards across tax-year boundaries
• Treats call options on the same underlying as identical property

The audit-grade PDF includes a superficial loss detail section showing each sale, the triggering repurchase, the amount denied, and the exact replacement shares whose ACB was increased. Run your own broker export through the ACB calculator. Your first calculation is free.

Frequently asked questions

Does the superficial loss rule apply to day trading?

Only if your trades are on capital account. Then each loss sale has its own 61-day window, and frequent repurchases can deny some or all of a loss when replacement shares are still held 30 days after the sale. If you trade on income account as a business, the rule does not apply to you at all, because there is no capital loss for it to deny and your losses are fully deductible business losses instead.

How do I calculate a partial superficial loss?

Use the three-limiter formula. If you sell 200 shares at an $800.00 loss, buy 60 replacement shares inside the window, and still hold 60 at the end of the window, the denied amount is 60 / 200 x $800.00 = $240.00.

If the loss is denied, is it gone forever?

Not usually. In most cases the denied loss is added to the ACB of your replacement shares. When you eventually sell those shares, the higher ACB reduces your capital gain, so you receive credit for the originally denied loss. The loss is deferred, not destroyed, unless the replacement purchase was inside a TFSA, RRSP, RRIF, or FHSA, in which case the loss is permanently lost because registered accounts have no ACB for tax purposes.

Does the rule apply if I buy in my TFSA after selling at a loss in my non-registered account?

Yes. Your TFSA is an affiliated person under ITA s. 251.1. If you sell at a loss in your non-registered account and buy the same security in your TFSA within the 61-day window (30 days before, the day of, and 30 days after), the loss is superficial, and because the replacement is in a registered account, the denied loss is permanently lost.

What if I only bought back some of the shares?

Only the proportion reacquired within the window is denied. The three-limiter formula calculates the exact amount: min(shares purchased in window, shares still held at window end, shares sold at a loss). The rest of the loss is allowed in full.

Does selling XIU and buying XIC trigger the rule?

No. XIU (iShares S&P/TSX 60 ETF) and XIC (iShares Core S&P/TSX Capped Composite ETF) are different securities with different CUSIPs. The CRA requires the replacement to be the same or identical property. Switching between similar but distinct ETFs for tax-loss harvesting is a legitimate and common strategy in Canada.

Does the 30-day window extend if I keep buying the same stock?

No. The window is fixed: 30 days before and 30 days after the specific sale. Additional purchases outside that window do not affect whether the original sale loss is superficial. However, if those later purchases are themselves sold at a loss, they have their own 61-day windows to evaluate.

Are superficial loss dates trade dates or settlement dates?

For publicly traded securities, ActiveACB uses settlement dates when they are available. CRA technical interpretation 2012-0468931C6 says the disposition occurs on settlement, when the seller is entitled to the proceeds. If a broker file omits settlement dates, ActiveACB falls back to that leg's trade date and warns when the missing date is close to a 30-day boundary.

My spouse bought the same stock I sold. Does that count?

Yes. A spouse or common-law partner is an affiliated person under ITA s. 251.1. If your spouse buys the same security you sold at a loss within the 61-day window, the loss is superficial. The denied amount is added to your spouse's ACB of those shares (not yours).

My adult child bought the same stock I sold. Does that deny my loss?

No. Parents, grandparents, children, grandchildren and siblings are not affiliated persons under ITA s. 251.1. Among relatives, only a spouse or common-law partner is affiliated. A corporation you or your spouse controls, and your own registered plans, can also be affiliated. A purchase by an adult child, a sibling or a parent inside the window does not make your loss superficial.

What is the CRA 30 day rule?

It is the everyday name for the superficial loss rule. If you sell a security at a loss and you, or a person affiliated with you, buys the same or identical security in the 30 calendar days before or after the sale and still holds it 30 days after the sale, CRA denies the loss for that year. The denied amount is added to the ACB of the replacement shares instead. The full window is 61 days: 30 before, the day of the sale, and 30 after.

What happens if I sell at a loss and buy back within 30 days in Canada?

The loss is superficial to the extent you rebought and still hold the shares on day 30. You cannot deduct that part this year. It is added to the ACB of the shares you bought back, so you recover it as a smaller gain or larger loss when those shares are eventually sold. If you bought back inside a TFSA, RRSP, RRIF or FHSA, the denied part is lost permanently.

Does the CRA 30 day rule apply to ETFs?

Yes, ETFs are capital property like any other security. Selling an ETF at a loss and rebuying the same ETF inside the window is a superficial loss. Selling one ETF and buying a different ETF that tracks a different index is not, because they are not identical property. Two funds from different providers that track the same index are treated by CRA as generally identical, so that swap is likely to be caught.

Can I claim a superficial loss?

Not in the year it arises. Section 40(2)(g)(i) of the Income Tax Act deems the loss to be nil to the extent it is superficial. The denied amount is not wasted in most cases. It is added to the ACB of the replacement shares under s. 53(1)(f) and comes back when those shares are sold. The exception is a rebuy inside a registered plan, where there is no ACB to add it to.

How do I report a superficial loss on Schedule 3?

Schedule 3 has no box for superficial losses. Report the disposition and leave the denied portion out of the loss you claim. Tax software usually asks whether a loss is superficial and handles it for you. On a paper return, note beside the row that part of the loss is superficial and keep a worksheet showing the real proceeds, ACB, outlays, the denied amount, and the add-back under paragraph 53(1)(f). Then, if the replacement shares sit in a taxable account, whoever holds them raises their ACB by the denied amount so the deferral works when they are sold. Inside a registered plan the loss is simply gone. Your T5008 will not reflect any of this.

Is the superficial loss rule the same as the US wash sale rule?

No, although the 61-day window is the same. Canada tests for the same or identical property and counts purchases by affiliated persons, which include your spouse, a corporation you or your spouse controls, and your own TFSA, RRSP, RRIF and FHSA. The US rule tests for substantially identical stock or securities and counts purchases by you, your spouse or a corporation you control. Both rules add the denied loss to the cost of the replacement shares, and both lose the loss permanently when the rebuy happens inside a retirement account.

What if I sell the replacement shares before the 30 days are up?

Then the second condition of the rule is not met. The definition in s. 54 requires that you or an affiliated person still own, or have a right to acquire, the substituted property at the end of the 30 days after the sale. If nothing is held at that point, the original loss is not superficial. In the three-limiter formula this shows up as zero shares still held at the end of the window, which denies nothing. The sale of the replacement shares is its own disposition with its own gain or loss.

Can I carry a superficial loss forward?

Not as a net capital loss. Net capital losses are allowed losses that exceed your taxable capital gains for the year, and CRA lets you carry them back three years or forward indefinitely. A superficial loss never becomes one. It is deferred a different way, by sitting inside the ACB of the replacement shares until they are sold, at which point it reduces that gain or enlarges that loss.