What is the superficial loss rule (30-day rule) in Canada?

The superficial loss rule prevents Canadian taxpayers from claiming a capital loss when they sell an investment at a loss and repurchase the same or identical property within a short period. This is Canada's equivalent of the U.S. "wash sale" rule.

The rule applies when:

A capital loss is denied if all three conditions are met:

• You (or an affiliated person) disposes of a property at a loss.
• You (or an affiliated person) acquires the same or identical property during the period that begins 30 calendar days before the sale and ends 30 calendar days after the sale (a 61-day window).
• You (or an affiliated person) still owns the property 30 days after the sale.

Affiliated persons include: your spouse or common-law partner, a corporation you or your spouse controls, your RRSP/TFSA/RRIF, or a trust where you are a majority-interest beneficiary.

What happens to the denied loss:

The denied loss is not lost permanently. It is added to the ACB (adjusted cost base) of the repurchased property. You will eventually recognize the loss when you sell the replacement property without triggering the rule again.

Example:

• You buy 100 shares of XYZ Corp at C$50 per share (ACB = C$5,000).
• You sell all 100 shares at C$30 per share (proceeds = C$3,000), creating a C$2,000 loss.
• Within 30 days, you repurchase 100 shares at C$32 (cost = C$3,200).
• The C$2,000 loss is denied and added to the new ACB: C$3,200 + C$2,000 = C$5,200.

How to avoid triggering the rule:

• Wait at least 31 days before repurchasing the same security.
• Purchase a similar but not identical security (for example, a different ETF tracking a different index).
• Ensure your spouse and your TFSA/RRSP do not buy the same security during this window.