Let us say I hold 4 stocks in a non tax sheltered account

  1. Stock A has capital gain of 10$.
  2. Stock B has capital loss of 20$.
  3. Stock C has gain of 10$ but it is intra day, hence counted as income, not capital gain.
  4. Stock D has loss of 10$, but it is intra day again.

So the loss for B will offset gain in A and there is still a loss of 10$ left over. Can I write it off against other income to reduce tax?

Also, can I write off the loss from D against the gain from C? I ask because I thought only capital losses can be written off, not short term losses.

  • 2
    What country are you in? Different countries have different rules. – Mike Scott Feb 22 '14 at 15:22
  • What does it mean when you say "Stock A has capital gain of 10$"? Has the share price of the Stock gone up but you are still owning the shares (since you say "I hold...."), or did you sell Stock A and realize a gain of 10$? – Dilip Sarwate Feb 22 '14 at 15:25
  • i sold A to realize a gain of 10$. – Victor123 Feb 22 '14 at 17:15
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    Are your assumptions about treating some as gains and some as ordinary income correct? Do you frequently day trade? Who advised you to treat your positions differently like that? – Chris W. Rea Feb 22 '14 at 17:28
  • 1
    @Victor There is no such 1-year minimum holding period in Canada to qualify a position's net proceeds as a capital gain. You have perhaps confused the U.S. short-/long-term capital gains rules for Canada's. If your income is mostly from your day job as developer and you only infrequently day-trade, you probably don't need to treat your gains as regular income, but seek a professional's advice to be sure. Don't rely only on what you read online, especially if it is not in a Canadian context. – Chris W. Rea Feb 25 '14 at 16:23

The loss for B can be used to write off the gain for A. You will fill out a schedule 3 with cost base and proceeds of disposition. This will give you a $0 capital gain for the year and an amount of $5 (50% of the $10 loss) you can carry forward to offset future capital gains. You can also file a T1-a and carry the losses back up to 3 years if you're so inclined. It can't be used to offset other income (unless you die).

Your C and D trades can't be on income account except for very unusual circumstances. It's not generally acceptable to the CRA for you to use 2 separate accounting methods. There are some intricacies but you should probably just use capital gains.

There is one caveat that if you do short sales of Canadian listed securities, they will be on income account unless you fill out form T-123 and elect to have them all treated as capital gains.

I just remembered one wrinkle in carrying forward capital losses. They don't reduce your capital gains anymore, but they reduce your taxable income. This means your net income won't be reduced and any benefits that are calculated from that (line 236), will not get an increase.

  • Thanks. So C and D can cancel each other out? – Victor123 Feb 25 '14 at 14:35
  • 1
    Yes, all capital losses in any given year are applied first to any gains in the same year. If they really were on income account they would also cancel out, but in a different place. – brian Feb 25 '14 at 14:46

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