Tax-Loss Selling: Using Losses to Achieve Tax Savings

2 min read

Brought to you by Sound Choices - AGF Education for Investors and Advisors

If you sell an investment in a non-registered account, you will trigger either a capital gain or loss. A capital gain occurs when you redeem your fund units or shares at a unit price that is higher than the adjusted cost base (ACB) – not the original investment price. If you sell the investment at a price lower than its ACB, the difference is called a capital loss.

A capital loss can be used to offset capital gains realized on the sale of other property (if not held in a registered plan). By selling an investment that has an unrealized loss (the act of selling the investment “realizes” that loss), you can lower (and possibly cancel out) any capital gains taxes owed. So, tax-loss selling refers to when you strategically sell an investment to trigger that capital loss.

Before we go any further, it’s important to note that the information in this article provides general information and is not tax or investment advice. You should consult with a tax advisor about your particular circumstances to determine if this is suitable for you.

Here are answers to some frequently asked questions:

How is the ACB calculated?

Determining your ACB involves more than simply knowing your original investment price. The ACB is the cost of your units or shares, plus any expenses you incurred to acquire them, such as commission and annual fees. Other factors such as additional purchases, partial redemptions, transfers, reinvested distributions and deemed distributions will also affect your ACB. Also, if the same fund is held in multiple non-registered accounts, you are required to calculate your ACB across all accounts.

So, to determine the ACB of your investment, you need to keep track of all transactions resulting in the purchase, sale, reinvestment of distributions or transfer of fund units or shares.

Here’s an example:




# of Units

ACB per Unit
(A ÷ B)


Purchase (includes any applicable acquisition fee)




Reinvested Distribution













Reinvested Distribution









Redemption ($5,000.00) sold at a price of $10.70




Reinvested distribution1




Return of capital of $1002




ACB at December 31, 2022




1 2022 total reinvested distribution of $250 included a return of capital of $100.
2 A return of capital reduces the calculation of ACB.


How is a Capital Gain Calculated?

A capital gain is calculated as follows:

Redemption Amount


- Redemption Fees

= Capital Gain



- $500.00

= $5,000.00


What type of redemption transactions trigger the reporting of capital gains or losses?


Does Not Apply

  • Sale of fund units or shares held within cash or self-directed cash accounts (cash = non-registered)
  • Transfer of assets from one Fund or Portfolio or Class to another in a non-registered account
  • Fees paid by a redemption of fund units or shares
  • Conversion fees paid on a transfer of assets from one class to another, for example, within AGF AWTAG (AGF All World Tax Advantage Group Limited)
  • Sale of fund units or shares held within a registered plan such as an RRSP (including spousal, locked-in and group RRSP), RRIF (including spousal and locked-in), TFSA (and group TFSA) or RESP (including group and family plan RESP)
  • Conversion of one series within a class of shares into another series of the same class of shares, for example within AGF AWTAG
  • Transfer of fund units between series of the same fund


What else should I be aware of?

Here are some of the factors to consider before taking advantage of tax-loss selling:



Current Year

To offset gains realized in a particular calendar year, losses must also be realized that year. Further, any gains triggered in the current year must be offset first before applying the losses to previous or future years. The losses can be carried back up to three years and forward indefinitely.

Mutual fund distributions

Mutual fund distributions are allocated to the investor based on the number of units owned on the record date, the date established by an issuer of a security for the purpose of determining a dividend or distribution. So if you own the fund on the record date, you will be allocated the full amount of the distributions regardless of how long you held the fund.

Portfolio rebalancing

Selling investments within a portfolio for the purpose of realizing capital gains / losses can change the asset mix. Your financial advisor can help ensure the portfolio is rebalanced to the asset mix that's appropriate for your needs. They can also help keep track of how these transactions impact each investment's ACB.

Superficial loss

This Canada Revenue Agency rule states that you (or a person affiliated with you) cannot buy the same investment within 30 days of the sale and claim a capital loss. A person affiliated with you includes, among others, a spouse / common-law partner or corporation.


As mentioned above, you should consult with your financial advisor to better understand how your portfolio could benefit from this strategy. Don’t have a financial advisor? Before you start your search, read about working with a financial advisor.


Commissions, trailing commissions, management fees and expenses all may be associated with investment fund investments. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

This material is for informational and educational purposes only. It is not a recommendation of any specific investment product, strategy, or decision, and is not intended to suggest taking or refraining from any course of action. It is not intended to address the needs, circumstances, and objectives of any specific investor. This information is not meant as tax or legal advice. Investors should consult a financial advisor and/or tax professional before making investment, financial and/or tax-related decisions.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

All World Tax Advantage Group is a mutual fund corporation that currently offers approximately 20 different classes of securities. In addition to fund diversification by investment style, geography and market capitalization, a key benefit of investing in any of the classes within the group is the possibility of sharing incurred expenses (and losses) of the combined structure, potentially offsetting income earnings to minimize chance of a dividend declaration. While the articles of AGF All World Tax Advantage Group Limited provide authority to make distributions out of capital and AGF All World Tax Advantage Group Limited intends both to calculate capital in the manner contemplated by the corporate statute for corporations that are not mutual fund corporations and only to declare distributions out of capital if there is sufficient capital attributable to a series, no definitive case law exists to confirm that a mutual fund corporation may make distributions of capital and how they are to be calculated. Further, no advance income tax ruling has been requested or obtained from Canada Revenue Agency, nor is AGF aware of any published advance income tax ruling or the possibility of obtaining such a ruling regarding the characterization of such distributions or the calculation of capital for such purposes.

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November 27, 2023