Sometimes, taxpayers that have realized substantial capital gains in a taxation year will attempt 세 recognize capital losses on other property that they do not truly want to dispose of, by selling and repurchasing the same property in a very short period of time. To address the situation where the disposition is solely tax-motivated (deduction of the loss), the rules on superficial losses prevent the recognition of a loss when the taxpayer has not really given up equity in the property (subparagraph 40(2)(g)(i)). The superficial loss is deemed to be nil. The loss that is not recognized is added to the ACB of the property repurchased (paragraph 53(1)(f)). A superficial loss is one realized by a taxpayer, but where an identical property is acquired or reacquired by either the taxpayer or an affiliated person within 30 days before and 30 days after the disposition. In its purest form, the superficial loss rule prevent a taxpayer from claiming the loss because of the reacquisition of the property (directly or indirectly through an affiliated person). The affiliated persons rule is needed so that the taxpayer cannot circumvent the rules by having another person, a spouse for example, reacquire the property.

The definition of “affiliated persons” is, by necessity, quite board and includes (see section 251.1 for additional affiliations):

• An individual and their spouse (including their common-law partner);

• A corporation and the person (including their spouse/common-law partner) who controls it; and

• A corporation and each member of an affiliated group of persons that controls it.