Q. I have securities with unrealized losses, should I sell them before December 24th?

A: Securities sold by December 24th may be settled by the end of the year in order to utilize losses against 2009-2012 capital gains.

Based on the settlement date, if you, or a person you are affiliated with, acquires the same or similar security within a
30-day period before the disposition or within a period ending 30 days after the disposition, the loss will be denied as a superficial loss. An affiliated person may include your spouse or a corporation controlled by you and or your spouse.

There is some relief from the superficial loss rule. The denied loss is added to the basis of the substituted property that effectively reduces any future gain on the sale to an unaffiliated person. If you do not fit within the 30-day rule, the loss is not a superficial loss.

If you transfer the security to your RRSP/RRIF the loss will be denied under another rule without an increase in basis of the substituted property.

If you want to engage in tax-loss selling but still wish to retain the security for other reasons, consider the transaction costs as well as the loss denial rules as they may be a detriment to your planning.

You should consult with your professional advisor on all related matters.