The Superficial Loss Rule: A Complete Guide for Canadian Investors
Canada's superficial loss rule denies capital losses when you, or an affiliated person, rebuys the same security within the 61-day window. Here is exactly how it works, where it catches investors by surprise, and how ActiveACB handles it automatically.
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. Specifically, a loss is superficial when you sell a security at a loss and you (or an affiliated person) buys back the same or identical property within the 61-day window: 30 days before the sale, the day of sale, and 30 days after.
The denied loss is not permanent in most cases. It is added to the adjusted cost base (ACB) of the replacement shares, deferring the loss until those shares are eventually sold. The exception is the TFSA/RRSP trap described below, where the loss is permanently lost.
The 61-day window
The window is:
- 30 calendar days before the sale date
- The sale date itself
- 30 calendar days after the sale date
All dates are trade dates, not settlement dates. A purchase made 30 days before the sale in any of the accounts described below triggers the rule, regardless of when that purchase settled.
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.
- Deep in-the-money call options: The CRA treats a call option as identical property to the underlying shares when the option is deep in the money (IT-387R2). Buying a deep call on a stock you just sold at a loss triggers the rule.
- 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
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.
The three-limiter formula
Not all of the loss is necessarily denied. The denied amount is the smallest of three numbers:
shares purchased within the window,
shares still held at the end of the window,
shares sold at a loss
)
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.
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 window extends 30 days into January of the following year.
This means you cannot confirm a December loss is allowed until 30 days into January. 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.
How ActiveACB handles superficial losses automatically
Upload your IBKR Flex Query XML or Questrade Activity Report XLSX 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 (cross-account detection when you upload multiple files)
- 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
- Identifies deep in-the-money call options as identical property
The report shows every superficial loss event: the sale date, the triggering repurchase, the amount denied, and the ACB adjustment applied.
Frequently asked questions
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 30 days, 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.
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).