A client realizes a $16,000 capital loss on one non-registered investment and a $28,000 capital...

Capital losses are used within the capital-gains system. In the same taxation year, the realized capital loss can reduce realized capital gains, producing a lower net capital gain before applying the taxable inclusion rules. Option A is wrong because capital losses can be valuable when gains exist. Option B is generally incorrect because net capital losses are not normally applied against employment income. Option D is also incorrect; a capital loss is not a refundable credit. A planner should also consider whether a sale creates a superficial loss if the same or identical property is repurchased within the restricted period by the client or an affiliated person. Current-year gains are usually offset first, and unused net capital losses may have carryback or carryforward treatment under tax rules. The planning objective is to coordinate realization timing so tax is minimized without allowing tax considerations to override investment suitability. References/topics: capital gains and losses, tax-loss selling, non-registered accounts, superficial loss rules.

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