Allowable business investment losses (ABILs)

Generally, capital losses are only deductible against capital gains. Capital losses can be carried back for up to three tax years and forward indefinitely.

There are also special rules—often referred to as “stop loss” rules—that will deny a capital loss in certain situations. For example, if you transfer a property with an accrued loss to an “affiliated person,” the loss will be denied. In general, you’re affiliated with yourself and your spouse or common-law partner and with a corporation that you control, or you and your spouse or common-law partner control—but not with your children.

Similar rules will deny the loss if you sell investments with an accrued loss and the property or an identical property is acquired by you or your spouse or common-law partner within the period beginning 30 days before and ending 30 days after the disposition, and it is still owned 30 days after the disposition.

Tax tip: If you realized a capital gain in the current year, consider selling investments with accrued losses before the end of the year. Keep in mind that transactions involving publicly traded securities take place on the settlement date, which is generally three business days after the trading date in the case of Canadian stock exchanges.