What is a superficial loss?
A superficial loss can occur when you dispose of capital property for a loss and both of the following conditions are met:
- You, or a person affiliated with you, buys, or has a right to buy, the same or identical property (called "substituted property") during the period starting 30 calendar days before the sale and ending 30 calendar days after the sale.
- You, or a person affiliated with you, still owns, or has a right to buy, the substituted property 30 calendar days after the sale.
Some examples of affiliated persons are:
- you and your spouse or common-law partner
- you and a corporation that is controlled by you or your spouse or common-law partner
- a partnership and a majority-interest partner of the partnership
- after March 22, 2004, a trust and its majority interest beneficiary (generally, a beneficiary who enjoys a majority of the trust income or capital) or one who is affiliated with such a beneficiary
If you have a superficial loss in 2020, you cannot deduct it when you calculate your income for the year. However, if you are the person who acquires the substituted property, you can usually add the amount of the superficial loss to the adjusted cost base of the substituted property. This will either decrease your capital gain or increase your capital loss when you sell the substituted property.
In certain situations, when you dispose of capital property, the loss may not be considered a superficial loss.
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