Selling a security at a loss, then buying it back right away "because you still believe in it": the manoeuvre looks harmless, and it is exactly the one the superficial loss rule targets. It does not punish — it defers. But anyone unaware of it claims a loss the tax authority will deny.
Why a realized loss matters
A capital loss realized in a non-registered account can, in principle, be used to reduce taxable capital gains — the mechanism described in the article on capital gains. Selling a security at a loss and buying it back soon after creates that loss while you hold the same security again. The superficial loss rule denies the loss in that case, when the repurchase falls within the period it sets: that is why the timing matters.
The window
The rule applies in principle when two conditions meet:
- the same security (or an identical property) is repurchased within a window running, as a general rule, from 30 days before to 30 days after the loss sale — sixty-one days in all, the sale date included;
- at the end of that window, the security is still held by you or by an affiliated person — notably a spouse or common-law partner, but also accounts you control: buying it back in your own TFSA or RRSP counts, in principle, as buying it back yourself.
The second point is the most frequent trap: selling at a loss in a non-registered account and buying the same security back in your TFSA that same week normally falls under the rule — and there, the loss can be gone for good, since the ACB of a registered account serves no purpose.
What becomes of the denied loss
Outside a registered account, the denied loss does not disappear: it is added to the adjusted cost base (ACB) of the repurchased security. It is therefore deferred — buried in the cost of the repurchase — and will resurface on the final sale.
A neutral worked example
- Purchase of 100 shares of a fictional security at $50: ACB $5,000.
- Sale at $40: proceeds $4,000, a $1,000 loss.
- Repurchase of 100 shares at $41 ten days later, in the same non-registered account: the $1,000 loss is denied (superficial loss).
- The ACB of the repurchase is not $4,100 but $4,100 + $1,000 = $5,100.
- Final sale, a year later, at $55: gain = $5,500 − $5,100 = $400 — instead of $1,400 without the adjustment. The denied loss reduced the final gain: deferred, not lost.
What this changes for your tracking
Everyfolio computes a tracking average cost, not a tax ACB: the app knows neither your other accounts, nor those of an affiliated person, nor the superficial loss rule. After a close repurchase, the cost shown by the app and the tax ACB can therefore diverge legitimately — that is one of the normal gaps described in the article on reconciling statements.
Official sources
The exact definition of the window, of identical properties and of affiliated persons is set by the Canada Revenue Agency. Quebec residents apply the equivalent rule with Revenu Québec on the provincial return. Consult their pages on superficial losses before claiming a loss followed by a repurchase.
- Canada Revenue Agency — line 12700, capital gains (and losses): https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains.html
- Canada Revenue Agency — guide T4037, Capital Gains (superficial loss): https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037.html
- Revenu Québec — citizens: https://www.revenuquebec.ca/en/citizens/
Informative, general content — not personalized advice. For your situation: your institution or an advisor.