Q: A large part of my RRSP investments include financial stocks and mutual funds. My last broker statement indicated the value of my investments have declined approximately 12 per cent since the beginning of 2007. Can I deduct these losses on my 2007 income tax filing?
A: The financial meltdown has affected us all in some aspect or another. Many investors, retirees, etc., can only look in awe as their investments decline in value. Most financial experts would agree, if you are in for the long term, hang in. World governments have intervened in the financial markets to avoid a recession and stop further declines of stock markets. Is this too little, too late? The next few months will tell.
Generally, the sale of stocks outside a Registered Retirement Saving Plan (RRSP) that have appreciated in value will attract capital gains tax. Conversely, the sale of stocks outside an RRSP that have depreciated can be used to reduce capital losses. A “disposition” or “deemed disposition” of investments must have occurred before an individual must report for tax purposes.
No! You cannot deduct the RRSP stock losses in your 2007 tax filing.
Stock trades, declines or appreciation in values inside an RRSP will not attract income taxes until a withdrawal from the registered plan takes place. In this event, taxes are due in the year of the withdrawal.
Henry Choo Chong, CGA provides professional accounting and taxation solutions for individuals, businesses and corporations. Henry can be reached at 416-590-1728, ext. 304. E-mail all questions to Money Matters: email@example.com.