Selling Non-Registered Investments to Buy Property Abroad — Canadian Tax Guide

The Adjusted Cost Base (ACB) is your tax cost in an investment — roughly, what you paid for it plus adjustments. When you sell, your capital gain is the selling price minus the ACB. Get the ACB wrong, and your reported capital gain is wrong. For securities held for 10–20 years with reinvested distributions (common in mutual fund accounts), the ACB can be significantly higher than the original purchase price — meaning your taxable gain is lower than a naive calculation would show. Conversely, return-of-capital distributions reduce your ACB below what you paid — meaning your taxable gain is higher. The CRA holds you responsible for accurate ACB tracking; brokers provide T5 slips but their ACB reports are advisory, not guaranteed correct.

Yes, and this is one of the most powerful tax planning tools available. If you know you will have a low-income year — the year you retire, a sabbatical year, a parental leave year — sell your non-registered investments in that year to realize gains at a lower marginal rate. A capital gain of $100,000 (50% inclusion = $50,000 added to income) realized in a year where your other income is $40,000 results in total income of $90,000 — below the OAS clawback threshold and taxed at moderate rates. The same gain in a year with $120,000 of other income results in $170,000 total income and significant OAS clawback risk.

The superficial loss rule denies a capital loss on a security if you (or an affiliated person) repurchase the same or identical security within 30 days before or after the sale. The purpose is to prevent artificial loss harvesting while maintaining economic exposure to the investment. For foreign property funding: if you are selling ETFs or mutual funds at a loss to fund the down payment, make sure you don't repurchase the same ETFs in your TFSA or RRSP within 30 days. If you do, the loss is denied and added to the ACB of the repurchased units instead.

Yes, but with a practical exception. Under the Income Tax Act, foreign currency is property. Disposing of foreign currency (by converting it to another currency) triggers a capital gain or loss. However, CRA's administrative position is that personal-use foreign currency transactions resulting in a gain of $200 or less are exempt from reporting. For large conversions ($50,000+) where you previously held foreign currency as an investment position, the conversion is a taxable event. Keep records of the exchange rate at the time of conversion to calculate any gain or loss on currency that has appreciated or depreciated since you acquired it.

T1135 (Foreign Income Verification) applies to specified foreign property you held at any point during the year with a total adjusted cost base exceeding $100,000 CAD. Non-registered investments in Canadian-listed securities (ETFs, stocks, mutual funds) are generally NOT specified foreign property — even if the fund holds international assets. You do not file T1135 for a Canadian mutual fund that invests in international equities. You DO file T1135 once you own the foreign real property directly. The T1135 obligation begins in the tax year you acquire the foreign property.

Yes. Capital losses carried forward from prior years (listed on your most recent CRA Notice of Assessment) can be applied against capital gains in the current year on a dollar-for-dollar basis. The loss reduces the net capital gain before applying the inclusion rate. If you have $30,000 of capital loss carryforward and realize $80,000 of capital gains in the current year, your net capital gain is $50,000. At the 50% inclusion rate, only $25,000 is added to income. This is a straightforward calculation — check your Notice of Assessment for your 'net capital loss balance.'