T5008/RL18 Trading Summary & Superficial Losses

My new client brought me T5008/RL18 Trading Summary (8 pages). In this summary, most transactions were performed within 30 days. Thus, if there is a loss, it should be considered a superficial loss and its amount should be added to the ACB of shares. I would like to know if I need to recalculate all transactions to reflect these superficial losses, or I can simply enter information from the T5008/RL18 into Schedule 3 assuming that brokerage already did all calculations including superficial losses. Thank you for your help.
Two more related questions
1) Do I need to report all transactions from T5008 on Schedule 3 individually, or I can enter summarized records per share type?
2) Do I need to do any adjustments in Excel trying to calculate gains/losses myself based on the provided T5008/RL18 Trading Summary, or I can just enter data from it into Schedule 3 without any additional calculations? (I noticed that this Trading Summary does not have the beginning ACBs carried forward from the last year - client does not have this information either)
Thank you very much.

Answer

7 people found this helpful

With regards to the superficial loss question:  

[===================================Superficial Loss Rules
These rules are outlined in Section 54 of the Income Tax Act and are part of the Stop Loss Rules.

This rule applies where a person or affiliated person acquires or had the right to acquire the same or identical property within 30 days after the disposition or 30 days before the disposition of the property in question. The disposition could have been made to anyone. In these cases, the loss on the disposition is denied and the amount of the loss is added to the cost of the substituted property.

There are some exceptions to this rule including:
1) a deemed disposition of a loan or deposit ceasing to be an eligible loan of an international banking centre business (paragraph 33.1(11)(a))
2) a deemed disposition where a taxpayer acquires property for some purpose and later uses it for the purpose of gaining or producing income, or vice versa (subsection 45(1))
3) a deemed disposition of a bad debt or a share, under the provisions of section 50
4) a deemed disposition on the death of the taxpayer (section 70)
5) a deemed disposition by a trust under subsection 104(4)
6) a deemed disposition when a taxpayer becomes, or ceases to be, resident in Canada
7) a disposition under the mutual fund reorganization rules of paragraph 132.2(1)(f)
8) a deemed disposition where a life insurer changes the use of the property (subsection 138(11.3)
9) certain dispositions under the mark-to-market rules applicable to financial institutions under subsection 142.5 (2) and paragraph 142.6(1)(b)
10) a deemed disposition of assets by an employee profit sharing plan under subsection 144(4.1) or 144(4.2)
11) a deemed disposition where a corporation ceases to be exempt from Part 1 tax (subsection 149(10))
12) the expiration of an option
13) a disposition of a debt obligation where the loss was denied under paragraph 40(2)(e.1)
14) a disposition by a corporation the control of which is acquired within 30 days after the disposition
15) a disposition by a person that becomes or ceases to be exempt from tax under Part 1 within 30 days after the disposition

The purpose of this rule is to prevent taxpayers from realizing deductible capital losses without any real intention to dispose of the property in question. However, taxpayers are motivated to obtain some tax benefit from their poor performing investments without permanently disposing of them.]=====================================

I am not sure that you refer to the taxpayer Re-Acquiring the same property after disposing of them and this is the primary cosideration when determining superficial losses.

With regards to your related questions:
1) CRA would like to be able to verify the reported amounts, so if you are efiling then you should probaly enter them all, otherwise CRA may come calling asking for the details.
2) If the information from the client's trading account does not have the information required to complete the schedule then you must determine the required information; in my past public accounting life, we would typically review trading account statements for the year and note the ACB in our files for future reference (for when they are later disposed of) so that we had the ACB.  If you do not have this, and you cannot rely on the information provided then the client has not provided you adequate information to complete the return and you shoud request it ASAP.  (at least I would)  It sounds like you may have to request several years worth of trading statements of have the client approach his investment dealer to request a history or download of the trading for  the past several tyears (or for specific investments if feasible)

Hope this helps.
Was this answer helpful? Yes No
2 additional answers

No answers have been posted

More Actions

People come to ProFile for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

  1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
  2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
  3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
  4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
  5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.

Select a file to attach: