Mr. X has incurred a large amount of capital gains during the year. Therefore,
Mr. X decides to sell securities with an accrued loss during the year, which
will offset his large capital gain balance on his tax return (in order to reduce
his overall net income for tax purposes). On December 1 of the current year,
Mr. X sells securities with an adjusted cost base of $15,000 for proceeds of
disposition of $10,000. In the long term Mr. X thinks these securities will
increase in value and would like to hold on to them for their potential future earnings;
therefore, Mr. X purchases identical securities on December 15, of the current year
for $8,000.
Required: Calculate the tax impact of Mr. X's transactions.
Solution:
Proceeds of disposition
Adjusted cost base
Capital Loss				Superficial loss
Reported on tax return		$0	Loss is denied
Instead the denied loss is added to the cost base of the new property:
ACB (new)
Superficial loss
New ACB		$ -