Canadian options -- expiring OTM on Dec 31st. Which tax year?

[d0rian]

Not sure how many traders of Canadian options there are here, but my understanding is that for US taxpayers, any trades made on Dec 31st still count towards the 2021 tax year. However, Canada does it differently:

• December 29, 2021 – Last trade date for 2021 Tax Gain/Loss Reporting for Canadian and U.S. Equity Markets
• December 30, 2021 – Last trade date for 2021 Tax Gain/Loss Reporting for Canadian and U.S. Options

- Source: RoyalBank memo

This year, Dec 31st is a Friday. If I hold weekly options that expire OTM / worthless on Dec 31st, anyone know what year that counts for? If I sold them for $0.01 on Dec 31st, it's clear they'd count towards 2022. But what if they simply expire worthless? Can't find any info online.

 

[GaryBtrader]

When they expire on Dec 31st that's a deemed disposition at $0. This would be a capital loss on your 2022 tax return. If you want to realize the loss in 2021 sell on Dec 30th or before.

 

[d0rian]

When they expire on Dec 31st that's a deemed disposition at $0. This would be a capital loss on your 2022 tax return. If you want to realize the loss in 2021 sell on Dec 30th or before.

Thanks for the reply; do you have a source on this? It seemed like a reasonable assumption, but it's not really clear that an expiration is functionally the same as a closing trade; the latter has an explicit T+1 settlement period (settlement required because instruments are ostensibly being delivered)...but in the case of an OTM expiration, there's no actual need for "settlement" of any kind; the options just expire worthless and are removed from your account. So it's possible they would be taxable for 2021 (this year)...

 

[nooby_mcnoob]

Thanks for the reply; do you have a source on this? It seemed like a reasonable assumption, but it's not really clear that an expiration is functionally the same as a closing trade; the latter has an explicit T+1 settlement period (settlement required because instruments are ostensibly being delivered)...but in the case of an OTM expiration, there's no actual need for "settlement" of any kind; the options just expire worthless and are removed from your account. So it's possible they would be taxable for 2021 (this year)...

If you are paying net taxes, they won't care. Not actually advice, but just experience.

 

[d0rian]

If you are paying net taxes, they won't care. Not actually advice, but just experience.

This is my assumption as well. On that point, have you had any conversations with the CRA (or an account with relevant experience) who has told you as much, or do you say this simply because you've historically reported net gains/losses (which may not perfectly match the CRA's annual reporting guidelines, which if you read them are actually quite gnarly from an administrative perspective) and never been audited or re-assessed?

 

[nooby_mcnoob]

This is my assumption as well. On that point, have you had any conversations with the CRA (or an account with relevant experience) who has told you as much, or do you say this simply because you've historically reported net gains/losses (which may not perfectly match the CRA's annual reporting guidelines, which if you read them are actually quite gnarly from an administrative perspective) and never been audited or re-assessed?

I have been audited by multiple governments, as long as you pay net taxes, they don't care. I tend to leave a little surprise for them in taxes which would mean they owe me money so they have learned the lesson to not audit me again.