Superficial Loss Rules Canada 2026: 30-Day Rule, Affiliated Persons & ETF Swaps

The superficial loss rule decides whether a loss you realize on a sale can be deducted in the year you sell. A capital loss is a superficial loss, and can't be deducted, if you or a person affiliated with you (such as your spouse or common-law partner, or a corporation either of you controls) buys, or has a right to buy, the same or identical property in the period from 30 calendar days before to 30 calendar days after the sale, and still owns it or has a right to buy it 30 calendar days after the sale. If you are the one who acquires the substituted property, you can usually add the denied loss to its adjusted cost base, so it reduces your gain or increases your loss when you sell it.

This page covers the conditions, who counts as affiliated, what happens to the loss, the case where a TFSA or RRSP does the buying, and how it affects tax-loss harvesting. It is part of the investment tax hub.

What counts as a superficial loss

The rule is the definition of “superficial loss” in section 54 of the Income Tax Act. The CRA’s capital losses page and Guide T4037 set it out as two conditions, both of which must be met, plus who counts and what happens to the loss (the exceptions are further down):

• You, or a person affiliated with you, buys or has a right to buy the same or identical property (the "substituted property") during the period from 30 calendar days before the sale to 30 calendar days after it, and
• you, or that affiliated person, still owns or has a right to buy the substituted property 30 calendar days after the sale.
• Affiliated persons include you and your spouse or common-law partner; you and a corporation controlled by you or your spouse or common-law partner; a partnership and its majority-interest partner; and a trust and its majority-interest beneficiary.
• A superficial loss can't be deducted when you calculate your income for the year.
• If you are the person who acquires the substituted property, you can usually add the superficial loss to its adjusted cost base, which decreases your capital gain or increases your capital loss when you sell it.

A right to buy counts as the property itself: the Act deems a right to acquire a property (other than a right held only as security, such as under a mortgage) to be identical to it. So an option or other contract to buy the same shares can trigger the rule even if you never take delivery inside the window.

If the second condition fails, for example because the repurchased shares were sold again before the period ended and nothing identical was held at its end, the loss is not superficial.

The window around the sale

The window runs from before the sale to after it, and it includes the sale day, so a purchase before the sale counts as well. That catches the “buy more first, then sell the old shares at a loss” pattern.

Who counts as an affiliated person

“Affiliated persons” is defined in section 251.1 of the Act. For an individual investor, the cases that matter are:

The CRA’s own list of examples matches: you and your spouse or common-law partner; you and a corporation controlled by you or your spouse or common-law partner; a partnership and a majority-interest partner; and a trust and its majority-interest beneficiary. Buying through a spouse is not a way around the rule, and a spouse’s purchase also brings in the attribution rules if you gave them the money.

What happens to the denied loss

Two provisions work together:

• The loss is nil for now. Under s. 40(2)(g)(i), a loss is nil to the extent it is a superficial loss, so it can’t be deducted in the year of the sale.
• It moves to the cost base of the substituted property. Under s. 53(1)(f), the amount of the superficial loss is added to the adjusted cost base of the substituted property in the hands of whoever acquired it. The CRA puts it this way: if you are the person who acquires the substituted property, you can usually add the superficial loss to its ACB, which “will either decrease your capital gain or increase your capital loss when you sell the substituted property.”

In a taxable account the loss is therefore deferred, not lost: it comes back when the substituted property is finally sold.

When a TFSA, RRSP or other registered plan is involved

There are two different situations, and both can cost you the loss for good.

Your registered plan buys the same property. A TFSA, RRSP or RRIF held in trust for you is affiliated with you, so if you sell at a loss in a taxable account and the same security is bought in one of those accounts inside the window (by you, or automatically through a dividend reinvestment plan or a pre-authorized purchase), the loss is superficial. The s. 53(1)(f) addition goes to the substituted property held by the plan, and a cost base inside a TFSA or RRSP has no tax use, so in practice the loss is gone.

You move a losing security into the plan. Section 40(2)(g)(iv) of the Income Tax Act and the CRA’s TFSA guidance set out the result:

• A contribution in kind is a disposition of the property at its fair market value at the time of the contribution.
• If the fair market value is more than the property's cost, you report the capital gain.
• A loss on a disposition of property to a trust governed by your TFSA, FHSA, RRIF, RDSP, deferred profit sharing plan or employees profit sharing plan is nil, so it can't be claimed.
• So is a loss on a disposition to an RRSP of which you or your spouse or common-law partner is the annuitant, or becomes the annuitant within 60 days after the end of the year.

The CRA’s Before you contribute to a TFSA page says the same for a TFSA: “If the FMV is less than the cost of the property, you cannot claim the capital loss”. This is a separate rule from the superficial loss rule, and no waiting period cures it. Selling the security in the taxable account, waiting until the window has passed, and contributing cash avoids both problems.

When the rule doesn’t apply

The CRA lists common situations where a loss is not considered a superficial loss even if the property is bought back:

• Some losses aren't superficial losses even if the property is bought back, including a sale you are considered to make because you became or stopped being a resident of Canada or changed the property's use.
• Nor is a sale considered to happen because the owner died, or a disposition that results from an option expiring.

The same list adds a disposition after which you became or ceased to be exempt from income tax within the window that follows the sale, and property appropriated by a shareholder on the winding-up of a corporation. When non-depreciable capital property is disposed of by a corporation, partnership or trust, a different deferral rule applies instead.

What is “identical property”

The Act doesn’t define “identical”. The CRA’s archived interpretation bulletin IT-387R2 says identical properties “are properties which are the same in all material respects, so that a prospective buyer would not have a preference for one as opposed to another”, and that whether two properties are identical “is a question of fact which must be decided on the basis of the relevant details in each situation.”

ETF swaps

One way to harvest a loss and stay invested is to sell one fund and buy a similar but not identical one the same day. For example, VCN (Vanguard FTSE Canada All Cap Index ETF) and XIC (iShares Core S&P/TSX Capped Composite Index ETF) are both broad Canadian equity funds with similar holdings, from different providers tracking different indexes. After the window has passed you can switch back if you prefer the original fund; that second switch realizes its own gain or loss.

Partial repurchases and dividend reinvestment

The rule isn’t all or nothing. If the shares acquired in the window are fewer than the shares sold, only part of the loss is superficial. Dividend reinvestment plans are the common trap: a DRIP purchase of the same shares inside the window is an acquisition of identical property, which can make part of the loss superficial. Turning the DRIP off before the sale, and checking any automatic purchases in a spouse’s account or in your registered plans, avoids purchases after it. On a partial sale, a DRIP purchase in the 30 days before the sale can still count, because the window starts before the sale.

Canada’s superficial loss rule vs the US wash-sale rule

Canadians who hold US investments or read US material often meet the American version. The two are similar but not the same:

In both countries the loss is normally postponed rather than erased, and in both a purchase inside a tax-sheltered account (a TFSA or RRSP in Canada, an IRA or Roth IRA in the US) is the case where it can be lost.

Records to keep

Trade confirmations show the sale and purchase dates that prove a gap longer than the window, or show that the replacement was a different security. Keep your own ACB records too, including any superficial loss added to a replacement’s cost base, since a broker’s book value may not reflect it; the ACB guide covers how to track it.

Related guides

• Investment tax hub
• Tax-loss harvesting in Canada
• Adjusted cost base (ACB): how to calculate it
• Capital gains inclusion rate
• Attribution rules in Canada
• Capital gains tax calculator