What are the stop-loss rules and how do they affect capital losses in Canada?

Canada's tax rules include several "stop-loss" provisions that restrict a taxpayer's ability to crystallize capital losses in certain circumstances. The most commonly encountered is the "superficial loss" rule, which denies a capital loss if the taxpayer or an "affiliated person" acquires the same or an identical property within 30 days before or after the date of sale. The denied loss is added to the ACB of the reacquired property, deferring it rather than eliminating it permanently.

Affiliated persons include your spouse or common-law partner, a corporation controlled by you or your spouse, and certain trusts. The rule is designed to prevent taxpayers from selling a property at a loss on paper while immediately reacquiring economic exposure to the same investment.

There are also stop-loss rules that restrict losses realized on "listed personal property" (art, rare books, jewellery, and similar items) — those losses can only be offset against listed personal property gains, not against other types of capital gains.

If you are planning a year-end tax-loss selling strategy, you need to be aware of the 30-day window and ensure neither you nor an affiliated person reacquires the property during that window. The loss will be denied if either of you buys back in too early.