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OCTOBER, 15 2013: TRANSFERING CAPITAL LOSSES TO A SPOUSE – YEAR END TAX PLANNING TIP

Capital losses can be transferred to a spouse or common-law partner by selling the loss shares, and having your spouse purchase those shares within 30 days.  You are denied the superficial loss, but the loss amount is used to increase the cost basis of your spouse’s investment.  Your spouse must hold the shares for more than 30 days for this to work.

Losses will also be disallowed if shares are transferred to a Registered Retirement Savings Plan (RRSP) or to a Tax Free Savings Account (TFSA) at a loss.  You may decide you have a good reason to make a transfer of a loss investment to this type of account.  If so, when completing your tax return, do not enter this disposal on your Schedule 3, as the loss cannot be claimed.

Tax Tip: The superficial loss rules provide a method for capital losses to be transferred to a spouse. The spouse must hold the shares for more than 30 days for this to work, so to do this for 2013 you should act fairly soon.

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