How can I claim a capital loss on an investment?

Gena Katz, a chartered accountant and principal with Ernst and Young, has the answer.

Gena Katz 20 March, 2003 | 2:00PM

Dear Expert:

I invested $150,000 in a stock portfolio five years ago. It grew to over $214,000 by early 2000, but my investment has since dropped to $137,000. If I sell everything now, can I declare the loss for income tax purposes?

Expert Opinion:

If you sell your investment portfolio this year, you will realize a capital loss equal to the difference between the cost base of the investments (what you paid for them) and your proceeds of disposition, net of any commissions paid. Based on the information you have provided, you will have a capital loss of $13,000 for 2003 in relation to this stock portfolio. For tax purposes, capital losses can only be used to reduce capital gains realized in the year, they cannot be claimed against other sources of income (unless they are business investment losses, relating to shares or debt of Canadian small business corporations). If your capital losses exceed capital gains realized in the year, the excess can be carried back to be applied to gains realized in the three previous years or carried forward to be applied against capital gains realized in any future year.

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No statement in this article should be construed as a recommendation to buy or sell securities or to provide investment advice or individual financial planning. Morningstar Canada does not provide specific portfolio advice and recommends the use of a qualified financial planner when appropriate.

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Gena Katz

Gena Katz