A Trap to Beware

Article Excerpt

The 2005 deadline for tax-loss selling on the Toronto Exchange is Friday, December 23. If you sell at a loss on or before that date, you can deduct your loss for tax purposes against 2005 capital gains. However, you can also carry your loss back for the past three years, or carry it forward indefinitely, to offset past or future capital gains. It’s always a good time to sell bad stocks, or stocks that are wrong for your portfolio. But you need to balance that rule against the fact that in the final couple of months of the year, some investors dump stocks unthinkingly, just to cut their taxes. In some cases they simply want to sell and be done with it. In others they intend to buy the stock back after 30 days (if you buy back any sooner, your loss becomes non-deductible). As a result, stocks that have been weak tend to stay weak in the final month or two of…

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