A capital loss occurs when you sell a capital property for less than its adjusted cost base, and it can be used to offset capital gains but generally not other income.
A capital loss is the shortfall when a capital property, shares, real estate, sells for less than its adjusted cost base plus selling costs. Only the taxable portion (mirroring the capital gains inclusion rate) is an allowable capital loss, and it can be applied against taxable capital gains, not against employment or business income.
Unused allowable capital losses can be carried back three years to recover tax on prior gains, or carried forward indefinitely. Watch the superficial loss rule, which denies a loss if you or an affiliated person rebuy the same property within 30 days.
You sell shares for a $10,000 loss and have no gains this year. You carry the loss back to offset a capital gain you reported two years ago, recovering the tax you paid on that earlier gain.
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