Topic Author
Posts: 1421
Joined: Wed Feb 02, 2005 3:58 am

Income Tax Question - Loss On Stock Exchange...

Tue Oct 11, 2005 9:51 am

Need some clarification, if anyone can oblige...

I am going to take a fairly substantial loss on a stock I purchased earlier in the year... it was simply a poor risk... did very well for a few months, then it slumped and it doesn't look like it will ever be viable again.

I have heard that it is possible to claim a capital loss on my income tax... is this accurate?

As well, any other related information you might have would be appreciated!

Bad spellers of the world... UNTIE!
Posts: 2933
Joined: Tue Aug 19, 2003 1:54 pm

RE: Income Tax Question - Loss On Stock Exchange...

Tue Oct 11, 2005 10:17 am

Quoting A332 (Thread starter):
have heard that it is possible to claim a capital loss on my income tax... is this accurate?

If it is within this year,that you invested "all" monies into the
stock market,then it is a loss and a write off if you cash out.
If you are longs,meaning from past years,for example, you invested
50k in 1995 and you cash out at 40k,you pay capital gains.

Have proper paper statements showing your profit and loss and which
some investments houses don't do it,request it!

Consult a tax(2) accounts because laws change before you cash in.
Add-on:I feel for you.The stock market has been bearish the last
couple years.I have stocks in retail and security sectors,and they have done
nothing.The sell shorts folks are making money, no doubt.

[Edited 2005-10-11 03:24:09]
Tuesday's Off! Do not disturb.
Posts: 280
Joined: Tue May 03, 2005 4:29 am

RE: Income Tax Question - Loss On Stock Exchange...

Thu Oct 13, 2005 3:15 am

It is accurate that you can claim a capital loss on your income tax. The allowable capital loss would only be 50% of the total loss. However, you might not have a chance to claim a deduction that reduces your taxable income. Allowable capital losses can only be deducted from taxable capital gains. If you have no taxable capital gains this year, you won't be able to use the capital loss to reduce your current year taxes. You’ll simply claim it and carry it forward.

You can carry unused allowable capital losses forward indefinitely for use against future taxable capital gains, so all is not lost. Also, when you die, your estate can claim a deduction for any unused allowable capital losses from any income--i.e., non-capital gains income as well--in the year of your death or in the year preceding the year of your death.

According to the title of the thread, you purchases stocks of a company listed on a public stock exchange. Is this correct? The reason why I ask is because different rules apply for investments in public and in private companies (that is, a private company whose shares are not publicly traded on a market).

What do you mean by "no longer viable"? Is the company kaput or are you simply convinced that although the company is still operating the stocks will never rise again? If the company is still viable, you'll have to sell the stocks to an arm's length party in order to trigger the loss. If, on the other hand, the company is finished, a loss can be recognized without there being a sale of the shares on your part (i.e., the shares are now worthless and can be written off).

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