Transfer of Capital Loss to a Spouse

Posted on December 28, 2011 by admin | Posted in Tax Tips

With the decline in the stock market over the past year, this month’s tax tip could provide you with some much needed tax relief. By transferring capital losses from one spouse who cannot benefit from the loss to another who has capital gains, taxes which are payable otherwise may be saved or at least deferred.

For example, assume Mr. A has shares with a fair market value of $10 and a cost of $100. If Mr. A sells shares to his spouse at fair market value, the capital loss of $90 ($10-$100) is deemed as nil by the CRA. The denied capital loss is added to the cost base of the shares acquired by Mrs. A. As a result, Mrs. A will now have shares with a fair market value of $10 and a cost basis of $100, resulting in an unrealized loss of $90. If Mrs. A waits at least 30 days before selling these shares, she will have access to the full capital loss. For more information on this and other tax-saving tips, contact your local DJB office.