If you transfer an investment to a registered account, it needs to be noted that this fictitious sale doesn’t trigger a tax-deductible capital loss resulting from the superficial loss rule.
If a stock goes bust, Jake, you possibly can claim a capital loss regardless that you could not have the opportunity to sell the shares. According to the Canada Revenue Agency (CRA):
So a bankrupt company needs to be an option, Jake. And to assert the loss, it’s essential to make a written election claim by attaching a letter under subsection 50(1) of the Income Tax Act to your tax return within the yr wherein you make an election claim.
Some brokers will buy the stock from you for a nominal amount. An administration fee may apply, but might also help you claim the loss and procure an official tax certificate (a.). T5008), which shows the disposition. This also means you will not should take care of the worthless security of your account for years.
You can claim capital losses to cut back capital gains made in the identical yr. If your losses in a tax yr exceed your gains, it’s also possible to carry losses back for up to 3 years to offset previous capital gains. And net capital losses can be carried forward indefinitely for use against capital gains in the longer term.
Allowable Business Investment Losses (ABILs)
If you own shares in an insolvent company that was a non-public company, you could have the opportunity to assert an allowable business investment loss (ABIL) as an alternative of a capital loss. The company have to be a Small Business Corporation (SBC).
Accordingly the CRA:
If subsection 50(1) of the Income Tax Act applies – essentially if the corporate is bankrupt or insolvent at the top of the yr – you possibly can apply for an ABIL with a small business corporation, Jake.
