Perspectives du pupitre de négociation

Podcast: Tax-Loss Selling for 2022 Year-End

16 nov. 2022

In today’s special episode, Kevin Prins, John Waters and Mark Raes talk taxes. After a challenging time in the markets, our experts dive into tax-loss selling strategies to help investors navigate the year’s end. They also discuss the must-know tax rules, the advantages of using ETFs for tax harvesting, and important dates to remember.

Kevin Prins is the Managing Director, Head of ETFs and Managed Accounts Distribution at BMO Global Asset Management. He is joined on the podcast by in-house experts John Waters and Mark Raes. John Waters is a Vice President and Director of Tax Consulting Services at BMO Wealth Planning and Advisory Services. Mark Raes is Head of Product at BMO Global Asset Management. 

The episode was recorded live on November 162022.

Episode Summary

Tax Update

Canada and the US are trying to scale back the pandemic spending over the last few years and find new sources of tax revenue to pay back the deficits created. Canada has a focus on supporting the middle class such as the new first-time tax-free home savings account which is expected to be introduced in 2023. There has also been a key theme in transparency with increased disclosure for trusts and aggressive tax planning.

Tax Loss Selling

Tax loss selling is a year end tax strategy where you tally up any realized capital gains and losses in all of your taxable non-registered accounts. If there is an overall net capital gain, you would consider triggering some capital losses to offset the gains that were realized in the current year to reduce your current year tax liability.

Tax Loss Harvesting

By disposing of securities with accrued capital losses, investors can help offset taxes otherwise payable in respect of other securities that were sold at a capital gain. The proceeds from the sale of these securities can then be reinvested in different securities with similar exposures to the securities that were sold, in order to maintain market exposure. If capital gains are not available in the current year, the realized losses may be carried back for three years to shelter gains realized in those years or carried forward to reduce capital gains in upcoming years. The ability to recognize a capital loss for tax purposes may be restricted in certain circumstances, including where the acquired security is identical to the security that is sold. Investors should not repurchase the loss security within 30 days of the loss sale. Investors should consult their own tax advisor to ensure that restrictions do not apply.

Important dates to remember:
December 28, 2022 – Last day for Canadian and U.S. tax-loss selling (with T+2 settle).

ETF advantages

Exchanges traded funds (ETFs) are effective tools for investors to help navigate these uncertain markets and can be used to help crystallize loss from a tax perspective. ETFs provide low cost, diversified portfolios that are great for tax harvesting since there are many solutions that provide different sector exposure and or similar exposures to many popular securities.

Please note the tables below are used for illustrative purposes only, where losses are calculated based on year-to-date. For tax purposes, capital losses are based on the difference between price sold and book value.

BMO ETFs: Tax-Loss Harvesting Guide 2022

Canadian Equities

Ticker

Name

Total Return YTD as of Oct 112022BMO ETFTicker
SHOPSHOPIFY INC - CLASS A-79.20BMO S&P/TSX Capped Composite Index ETFZCN
IMGIAMGOLD CORP-60.66BMO Equal Weight Global Index ETFZGD
AP-UALLIED PROPERTIES REAL ESTATE-37.26BMO Equal Weight REITS Index ETFZRE
MGMAGNA INTERNATIONAL INC-34.15BMO Equal Weight Industrials Index ETFZIN
CCACOGECO COMMUNICATIONS INC-33.71BMO Global Communications Index ETFCOMM

Source: Bloomberg Oct 11th, 2022

US Equities

TickerNameTotal Return YTD as of Oct 112022BMO ETFTicker
NFLXNETFLIX INC-63.58BMO Covered Call Technology ETF

ZWT

NVDANVDIA CORP-60.25BMO Covered Call Technology ETFZWT

MRNA

MODERNA INC-51.00BMO Equal Weight US Health Care Hedged to CAD Index ETF BMO BMO Equal Weight US Health Care Index ETFZUH ZHU
INTCINTEL CORP-49.77BMO Covered Call Technology ETFZWT
NKENIKE INC -CL B-47.14BMO MSCI USA Hight Quality Index ETFZUQ

Source: Bloomberg Oct 11th, 2022

Fixed Income

TickerNameYTD Return (%)TickerName
VABVanguard Canadian Aggregate Bond ETF-11.88ZDBBMO Discount Bond Index ETF

XBB

iShares Core Canadian Universe Bond ETF-11.89ZDB

BMO Discount Bond Index ETF

HBBHorizons CDN Select Universe Bond ETF-12.02ZDBBMO Discount Bond Index ETF
ZAGBMO Aggregate Bond Index ETF-11.87ZDBBMO Discount Bond Index ETF
CACB

CIBC Active Investment Grade Corp Bond ETF

-11.20ZCDBBMO Corporate Discount Bond ETF
ZCBiShares Core Canadian Corp Bond ETF-10.94ZCDBBMO Corporate Discount Bond ETF
VCB

Vanguard Canadian Corporate Bond ETF

-10.09ZCDBBMO Corporate Discount Bond ETF

Source: Bloomberg September 30th, 2022

For more on this topic please review BMO ETFs: Tax-Loss Harvesting Guide 2022


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Disclosure:

The viewpoints expressed by the Portfolio Manager represent their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance. Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance.

S&P®, S&P/TSX Capped Composite®, S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and TSX” is a trademark of TSX Inc. These trademarks have been licensed for use by S&P Dow Jones Indices LLC and sublicensed to BMO Asset Management Inc. in connection with the above mentioned BMO ETFs. These BMO ETFs are not sponsored, endorsed, sold or promoted by S&P Dow Jones LLC, S&P, TSX, or their respective affiliates and 

S&P Dow Jones Indices LLC, S&P, TSX and their affiliates make no representation regarding the advisability of trading or investing in such BMO ETF(s).

TSX” is a trademark of TSX Inc. These trademarks have been licensed for use by S&P Dow Jones Indices LLC and sublicensed to BMO Asset Management Inc. in connection with the above mentioned BMO ETFs. These BMO ETFs are not sponsored, endorsed, sold or promoted by S&P Dow Jones LLC, S&P, TSX, or their respective affiliates and S&P Dow Jones Indices LLC, S&P, TSX and their affiliates make no representation regarding the advisability of trading or investing in such BMO ETF(s).

Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the BMO ETF’s prospectus. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/​or elimination.

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