Are there any pitfalls I should be aware of when selling a stock in a loss position?
Allan Madan, CA
This is a good strategy if you have capital gains in the current year or the past 3 years. However, you should be aware of the ‘Superficial loss’ rule. This rule states that if you sell your stock at a loss, and subsequently you or someone ‘affiliated’ to you (eg. Your spouse, etc) repurchases the same share, your capital loss will be denied.
Instead, all of the capital loss denied will be added to the cost basis of the newly purchased shares. This means that when you or affiliated person sells the shares later on, they will realize the benefits.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CA.CPA.CGA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
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