What is the superficial loss rule in plain terms?
You sell a property at a loss; the same or identical property is acquired within a defined period around that sale by you or by someone affiliated with you; and it is still held at the end of that period. If all three hold, the loss is not allowed on your return. In the ordinary case it is not destroyed either. It attaches to the cost of the property in the affiliated holder's hands, so it emerges when that holding is eventually sold without a fresh purchase. The window runs on both sides of the sale, which is the part most people miss.
Who counts as an affiliated person for a superficial loss?
Wider than most people expect, and that is where the rule bites. It reaches beyond you to a spouse or common-law partner, and to corporations and trusts connected with you or with them. So a purchase you never made can deny your loss, including one made inside a company you control or by a trust set up for your family. Before selling at a loss, list the accounts and entities in that circle and check purchases in the window on both sides of the intended sale. Doing it afterwards only tells you what has already happened.
My spouse rebought the shares I sold at a loss, now what?
If the shares are the same or identical property, the purchase fell inside the window, and they still hold them at the end of it, your loss is denied. The amount is generally added to the cost of their holding rather than lost, so the benefit is recoverable when they sell without repurchasing. Two practical consequences follow. Your return should not claim the loss, and their cost base record has to be adjusted and then kept, because the benefit only materialises years later on their disposal. Write down the dates and the adjustment while the confirmations are still to hand.
Does moving shares into a registered account kill the loss?
That is the case where denial is permanent rather than temporary. The loss is denied because the property has been acquired by an affiliated holder, but the plan's own gains and losses sit outside the ordinary computation, so there is no cost base on a taxable return for the denied amount to attach to and come back out of later. Transferring a losing holding in kind is therefore an expensive way to use contribution room. Selling on the market, letting the window run and contributing cash is a different transaction with a different outcome.
Does the window count purchases made before the sale as well?
Yes, and this is the most common reason a loss someone expected to claim is denied. The period runs before the sale as well as after it, so a purchase in the run-up can be the acquisition that catches the later sale: topping up a position, a dividend reinvestment, or a regular monthly contribution buying the same fund. Automatic arrangements are the usual culprit, because nobody thinks of them as trades. Before selling at a loss, look back over every account for scheduled purchases of the same property, not just forward at what you intend to buy.
Is a superficial loss lost forever or added to cost base?
It depends on who holds the reacquired property. Where you or an affiliated taxable holder owns it, the denied amount is generally added to the cost of that holding, so the loss is deferred and emerges on a later sale made without a repurchase. Where the acquirer's holdings sit outside the ordinary tax computation, there is nothing for the amount to attach to and the loss is simply gone. The distinction matters in advance, because the two outcomes look identical on the return for the year of the sale and only diverge afterwards.
How does the treaty tie-breaker work when both countries say I am resident?
As a sequence, stopping at the first test that gives an answer: where you have a permanent home available; if in both or neither, where your centre of vital interests is; then habitual abode; then nationality; and if all of those tie, the two tax authorities decide by agreement. It is evidential rather than elective — you do not choose your treaty residence, you demonstrate it, which makes the record of homes, family and time the substance of the claim. See tie-breaking dual residency.
Which country do I pay tax to first?
Generally the source country — where the income arises — taxes first, often by withholding before you receive it. Your country of residence then taxes the same income and credits what the source country took. That order is why timing matters: a residence-country return filed before the source-country tax is settled has nothing to credit yet. Getting the sequence right is most of the work. See international tax planning.
