Clark Wealth Management Group - ScotiaMcLeod Fredericton

Today is the last day to transact on the Canadian equity markets and have things completed in the 2011 tax year. If the securities you’re dealing with are listed on US equity markets, the deadline is December 27th.
With most major world equity benchmarks in the red for the year, there are likely some tax planning opportunities for many investors. Tax loss selling is an important tax planning consideration to be thinking about as we head into year-end.
Capital losses incurred in taxable accounts can be used to offset taxable capital gains in the following ways: (1) Investors may carry back losses to one of the three previous years to offset any capital gains in those years and recover some of the taxes already paid. (2) Investors may carry forward losses indefinitely to offset capital gains generated in the future.
We recommend investors review their portfolios and address positions that have declined materially in value. Where the fundamental outlook for the company and its relative return have improved or remain attractive, investors should consider repurchasing the security after the required 30 day restriction period. For those whose prospects are no longer attractive, other investments should be considered as a replacement.
To aid clients with tax planning, each year ScotiaMcLeod prepares a list of suggested tax-loss selling candidates. Here is a small sampling of our 2011 top 30 candidates. Some we suggest buying back and others we suggest redeploying to another, better opportunity.  Research in Motion could be replaced by iShares S&P/TSX Capped Info Tech Index ETF; Manulife Financial could be replaced by iShares S&P/TSX Capped Financial Index ETF or Royal Bank.; Uranium One could be replaced by Cameco Corp.; and Teck Resources could be sold and repurchased following the required 30 calendar day waiting period.
For those names trading on US exchanges, here are a few examples. Morgan Stanley could be replaced by SPDR S&P Capital Markets ETF or Wells Fargo & Co; Advanced Micro Devices could be replaced by Intel Corp; and General Electric could be sold and repurchased following the required 30 calendar days waiting period.
As you consider these things, consult your own advisor. Be sure as well to use the opportunity to do the all-important portfolio rebalancing that must happen periodically. This could mean buying another class of asset entirely so approach the process with discipline and with an open mind to consider all the possibilities instead of focusing too much on recovering the loss as quickly as possible. Focusing on the quickest possible recovery of a capital loss is a dangerous tactic to employ.
From my family and I to you and yours, best wishes for a joyous holiday season and a new year filled with good health, happiness and prosperity.
Keir Clark, is a senior wealth advisor, with Clark Wealth Management Group, associate director wealth management and branch manager at ScotiaMcLeod in Fredericton, NB. He can be reached online at www.keirclark.ca or by telephone at 506-450-6465.
Information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, expressed or implied, is made as to the accuracy or completeness.