Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: A taxpayer disposes of securities and realizes a capital loss and the taxpayer's TFSA immediately repurchases the securities. Will the taxpayer be denied the capital loss as it is a superficial loss pursuant to section 54 of the Act?
Position: Yes, it will be a superficial loss.
Reasons: A taxpayer's TFSA trust is considered an affiliated person with the taxpayer. Therefore, the situation as described will fall within the definition of "superficial loss" in section 54.
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Dear XXXXXXXXXX :
The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your correspondence concerning losses and Tax-Free Savings Accounts (TFSAs). Please accept my apology for this delayed response.
Under the Income Tax Act, a taxpayer's TFSA trust is considered a person affiliated with the taxpayer. Generally, under the Act, a superficial loss can occur when a taxpayer disposes of capital property for a loss and:
- the taxpayer, or a person affiliated with the taxpayer, 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; and
- the taxpayer, or a person affiliated with the taxpayer, still owns, or has a right to buy, the substituted property 30 calendar days after the sale.
Under the Act, a taxpayer's loss from the disposition of property is nil to the extent that it is a "superficial loss." Accordingly, a capital loss realized from securities sold by a taxpayer and then immediately repurchased by the taxpayer's TFSA trust would be considered a superficial loss, and the amount of the capital loss would be nil.
I trust that the information I have provided is helpful.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P.
Minister of National Revenue
Peky Tsang (613) 957-9769
2009-034305
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