Both Canada and the United States have rules that deny a tax loss when you sell a security at a loss and buy it back too soon. They are similar in spirit but differ in the details. This is a plain-language overview to help you ask the right questions — not tax advice.
The Core Idea Is the Same
In both countries, if you sell at a loss and repurchase the same (or substantially identical) security within a 30-day window, the loss is not simply lost — it is deferred by adding it to the cost of the repurchased shares. The goal of both rules is to stop investors from claiming a tax loss while effectively keeping the same position.
Canada: The Superficial Loss Rule
- Window: 30 calendar days before and 30 days after the settlement of the sale.
- Affiliated persons: the rule also applies if your spouse, or a corporation you control, buys the identical security in the window.
- Effect: the denied loss is added to the adjusted cost base (ACB) of the repurchased shares, so it is recognized later when those shares are eventually sold.
US: The Wash Sale Rule
- Window: 30 days before and 30 days after the sale (a 61-day window centered on the sale).
- Substantially identical: applies to the same or substantially identical securities, including certain options and, in some cases, purchases in your IRA.
- Effect: the disallowed loss is added to the cost basis of the replacement shares, and the holding period is generally adjusted.
Key Differences to Watch
Terminology and mechanics differ: Canada speaks of 'affiliated persons' and ACB; the US uses 'substantially identical' and cost basis with holding-period adjustments, and has specific guidance on IRAs. What counts as 'identical' or 'substantially identical' is not always obvious — swapping one broad-market ETF for a very similar one is a common grey area in both systems.
Official Resources
Disclaimer: This article is for informational and educational purposes only and is not tax, legal, or investment advice. The rules summarized here are simplified and can depend on your specific facts, residency, and account types. Cross-border investors face additional complexity. Always consult a qualified tax professional in the relevant country before acting.
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