Transferring capital losses to your spouse

Part of any tax plan involves looking for opportunities to split income between spouses. Sometimes tax savings don't come from splitting income, but rather from sharing losses. When one spouse has all of the capital gains and the other has all of the capital losses there may be a way to offset the gains and the losses against each other.

Last issue we talked about the "dreaded" superficial loss rules, and how they can undermine your tax planning strategy. The secret to not being afraid of the superficial loss rules is to understand them. Now, would you believe us if we told you they could help you?

THE PROBLEM WITH CAPITAL LOSSES

Capital losses can only be used to reduce capital gains. If your current year's capital losses exceed your capital gains, then the loss can be carried back up to three years to reduce capital gains reported in those years. If you have no capital gains in the three prior years, then your losses can be carried forward indefinitely.

Now, if you're unfortunate enough to have an accrued capital loss, and no other source of capital gains, then there is no tax...