Tax-loss harvest using ETFs

Clients only have until Monday, December 24 to tax-loss harvest.

And with markets up this year, your clients may want to offset capital gains by selling stocks that had negative returns and realize capital losses to mitigate tax liability.

Read: Don’t miss these year-end tax deadlines

In addition to being applied against realized capital gains, these losses can be carried back three years or carried forward indefinitely.

National Bank has created a list of stocks from the S&P/TSX Composite index that are down year-to-date by more than 5% and have a corresponding ETF to provide an approximate equivalent exposure.

Investors must wait 30 days after the sale before buying the stock back to preserve the tax loss in accordance with CRA tax rules.

Read: Getting tax back with ETFs

During the 30-day period, investors can access other products to help provide an approximate exposure to the equity sold, such as an ETF. The ETF will give a sector-specific return in place of the stock. When appropriate, investors can cycle back into the underlying equity.

Read: Tax-loss harvesting deadline looming, from 2011

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The staff of Advisor.ca have been covering news for financial advisors since 1998.