Nortel Losses & In-Kind Transfers At A Loss to RRSP

by Tax Guy - Burlington Accountant on February 20, 2009 Print This Post Print This Post

Capital Losses

Question: I have sold some mutual funds and have capital losses from the sale. Can I use these losses against a capital gain I have on the sale of a rental property?

Yes. Capital losses incurred in any tax year must be applied first be applied to capital gains from the current year. Any excess losses can be carried back three years or forward indefinitely and used against any capital gains.

In-Kind Transfers to an RRSP

Question: If I sell investments at a loss, I will have a capital loss. If I’d like to keep these investments, can I transfer them to my RRSP and claim the loss?

No. The transfer of an investment to an RRSP at a loss is denied under the income tax act and the loss can never be used. Similarly, you cannot sell the investment and purchase the same investment inside a registered (RRSP or RRIF) within 30 days. Any loss is also denied under revised superficial loss rules in the income tax act.

Claiming A Capital Loss On Nortel Shares

With Nortel bankrupt, how do I claim a capital loss.

At the time of writing, Nortel was still trading although the company is bankrupt. The only way to realize the loss is to sell or donate the shares to an unrelated third party.

If Nortel is wound-up, then a loss can be claimed. However, if the shares are de-listed and Nortel contributes to operate, then there is no way to claim the loss until you can find a buyer.

Capital Gains

Question: We have just sold a residential rental property and had to pay off the mortgage. Can I apply the amount owing on the mortgage against the capital gains?

The mortgage cannot be applied to the capital gain. The gain on the sale of the property is taxable while the mortgage was only extinguished and there is no capital gain or loss on the mortgage.

Foreign Property

Question: If I sold my Foreign Personal-Used (only one) apartment and have gain on it. Should I pay income tax on that selling?

If you are a resident of Canada, the sale of any real property is a taxable gain or loss.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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{ 3 comments }

Ditek Lo May 14, 2009 at 7:31 am

According to the following article, the CRA allows repurchasing shares in an RRSP within 30 days that were sold outside the RRSP (http://www.morningstar.ca/globalhome/Industry/news.asp?articleid=ArticleID116200314221&lang=eng). Your information here contradicts that. Can you confirm you are correct? Thanks.

Tax Guy May 14, 2009 at 9:09 am

The article is at least 6 years old (Jamie refers to the Canada Customs and Revenue Agency – Which changed in 2003). I had sent Morningstar a e-mail several months ago telling them to either add a date to the article or pull it.

The law regarding superficial losses and in-kind transfers to RRSP’s changed in 2005. Superficial loss rule now apply to selling securities in a non-registered account and repurchasing them is an RRSP.

Ditek Lo May 14, 2009 at 5:08 pm

Thanks for such an excellent, clear reply. I’m glad I didn’t just take the other article at face value.

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