What is the superficial loss rule in Canada?

The superficial loss rule (ITA Section 54) denies a capital loss when you or an affiliated person sells a property at a loss and you or an affiliated person acquires the same or identical property within 30 days before or after the sale date, AND you or an affiliated person still holds the property 30 days after the sale. The loss is not gone — it is added to the ACB of the reacquired property.

Who counts as an "affiliated person" for superficial loss?

Affiliated persons include: your spouse or common-law partner; a corporation you control; a partnership you are a majority partner in. Importantly, your own TFSA, RRSP, RRIF, and FHSA accounts are NOT affiliated persons — but swapping a loss position from a non-registered account into a registered account can trigger the superficial loss rule depending on how the purchase is timed.

How do I avoid triggering the superficial loss rule?

Wait at least 31 days after selling a loss position before repurchasing the same security. Alternatively, buy a similar but not identical security immediately (e.g., swap VFV for XSP — both are S&P 500 ETFs from different providers that CRA generally treats as distinct). However, CRA can challenge "substantially similar" securities in some circumstances.

What happens to a denied superficial loss?

The denied loss is not permanently lost. It is added to the adjusted cost base (ACB) of the repurchased shares. This means you will recognize the loss later when you eventually sell those repurchased shares — but only then.

Does Canada Have a Wash-Sale Rule? The Superficial Loss Rule Explained

Q: Does Canada have a wash-sale rule?

No. Canada does not have a wash-sale rule like the United States. However, the CRA superficial loss rule achieves a similar result: if you sell a security at a loss and buy the same or identical property within 30 days before or after the sale, the capital loss is denied. The denied loss is added to the adjusted cost base (ACB) of the repurchased shares, deferring — not eliminating — it.

Canada vs. the U.S.: Wash-Sale vs. Superficial Loss

Feature	U.S. Wash-Sale Rule	Canada Superficial Loss Rule
Exists in law	Yes (IRC Section 1091)	Yes (ITA Section 54)
Trigger window	30 days before OR after the sale	30 days before OR after the sale
“Same security” definition	Same stock, option on same stock	Same or identical property
Effect	Loss permanently disallowed	Loss added to ACB of repurchased security (deferred, not lost)
Affiliated accounts	IRAs and related accounts can trigger it	Your registered accounts (RRSP/TFSA) are NOT affiliated but can create wash-sale-like issues

The practical impact is similar: you cannot sell at a loss, immediately rebuy the same holding, and claim the capital loss.

How the Superficial Loss Rule Works

The rule triggers when all three of these conditions are met:

You (or an affiliated person) sells a property at a capital loss
You (or an affiliated person) acquires the same or identical property within the 30-day window (30 days before OR 30 days after the sale date)
You (or an affiliated person) still holds the property on the 31st day after the sale

If all three conditions apply, the capital loss is denied for the year. Instead, the denied loss amount is added to the ACB of the repurchased property.

Example

Step	Action
Dec 1	You buy 100 shares of XYZ at $50/share — ACB = $5,000
Dec 20	XYZ falls to $40/share. You sell all 100 shares → proceeds = $4,000, loss = $1,000
Jan 5	You buy 100 shares of XYZ again at $40/share
Jan 20	You still hold the XYZ shares (within 30 days of Dec 20 sale)

Result: The $1,000 capital loss is denied. The $1,000 is added to the ACB of the January purchase.

New ACB of repurchased XYZ shares: $4,000 + $1,000 = $5,000 per lot (or $50/share)
When you eventually sell those shares at, say, $45, your loss will be $500 — you’ll recognize part of the original loss then.

The loss is deferred, not permanently eliminated.

What Is “Identical Property”?

CRA’s position is that identical property means fungible, interchangeable securities — shares of the same corporation, units of the same fund. Key points:

Same ETF = identical property: Selling VCN (Vanguard FTSE Canada) and immediately buying VCN again triggers the rule
Different ETF tracking same index = generally NOT identical: Selling XIC (iShares S&P/TSX) and buying VCN (Vanguard FTSE Canada) tracks a different index and different securities — generally treated as distinct property
U.S.-listed vs. Canadian-listed versions of same fund: VTI and VUN (Vanguard U.S. total market, different listings) — these may be considered identical in some CRA interpretations; use with caution
CRA has not published a comprehensive list — there is legal uncertainty for tightly correlated ETFs that hold the same underlying securities

Conservative practice: switch to a fund tracking a different index from a different provider.

Affiliated Persons: Who Triggers the Rule on Your Behalf

Person / Account	Affiliated for superficial loss?
Your spouse or common-law partner	Yes — spouse’s purchase within the window denies your loss
Corporation you control	Yes
Your own RRSP / TFSA / RRIF / FHSA	No — registered accounts are not affiliated persons
Your children’s accounts	No

RRSP/TFSA practical issue

Even though your registered accounts are not “affiliated persons,” timing matters:

If you sell XYZ at a loss in your non-registered account and your RRSP buys XYZ within 30 days, the superficial loss rule does apply — you are the person who sold AND the person who bought (via the RRSP).
The denied loss is added to the RRSP’s ACB — but ACB inside an RRSP is meaningless (all withdrawals are income anyway), so the loss is effectively permanently lost rather than deferred.

Warning: Moving loss securities from non-registered to RRSP/TFSA can permanently destroy the loss. Do not do this as part of a tax-loss harvesting strategy.

Planning Around the Superficial Loss Rule

Option 1: Wait 31 days

Sell the losing position and do nothing for 31 calendar days. Then repurchase. The loss is fully realized. Risk: the security may recover during the waiting period.

Option 2: Swap to a similar (not identical) security

You hold	Swap to	Notes
XAW (iShares All-World ex-Canada)	VXC (Vanguard FTSE Global All-Cap ex-Canada)	Different provider, different index — generally safe
VFV (Vanguard S&P 500 CAD hedged)	ZSP (BMO S&P 500 ETF)	Same index, different provider — could be challenged
XIU (S&P/TSX 60)	VCN (FTSE Canada All-Cap)	Different index — generally safe
XBB (iShares bond)	VAB (Vanguard bond)	Different provider — generally safe

Note: “Same index, different provider” ETFs are a grey area in Canadian tax law. CRA has not issued comprehensive guidance. The safest swaps use a different underlying index.

Option 3: Tax-loss harvest only on positions where you do not want to re-own the security

If you genuinely want to exit a position, sell it, harvest the loss, and move on — no superficial loss concern arises.

How This Differs from U.S. Wash-Sale Rule

The key practical difference for Canadian investors:

Aspect	Canada	United States
Is the loss permanently gone?	No — added to ACB and recovered on future sale	Yes — loss permanently disallowed in the year
Registered account trap	Your RRSP/TFSA purchase triggers the rule but destroys the loss (no ACB meaning in RRSP)	IRA purchases by you trigger the rule
Spousal accounts	Spouse’s purchase triggers your superficial loss	No explicit spousal wash-sale rule
Effect on planning	Somewhat gentler — just defer	Harsher — truly gone