It’s 2025, and the stock market is teeming with cool companies working on everything from artificial intelligence to space tech. So why would you consider owning a highly indebted telecom like BCE Inc. (TSX:BCE) – a company most Canadian customers wouldn’t say they enjoy dealing with?
Earlier this year, BCE cut its dividend in half, bringing the payout ratio down to more sustainable levels. But honestly, the cut hasn’t done much for shareholders who are still bagholding what was once thought of as a “safe stock.”
With December just around the corner, underwater shareholders might eye an opportunity: selling BCE shares in a non-registered account to claim a capital loss deduction that can offset capital gains elsewhere (If your BCE holdings are inside a TFSA, you won’t be able to claim the loss, so holding may make more sense.)
What is tax-loss harvesting?
Tax-loss harvesting is the strategy of selling an investment in a non-registered account for less than you paid, realizing a capital loss that the CRA allows you to use to reduce your tax bill.
This loss can be used to offset capital gains, which are otherwise taxable when you sell profitable investments. If you don’t have gains this year, the loss can be carried back three years or carried forward indefinitely, giving you long-term flexibility in managing taxes.
But there are rules—specifically, the superficial loss rule. This rule applies when you sell an investment at a loss and then repurchase it within 30 days before or after the sale. If that happens, the CRA rejects the loss and adds it back to the adjusted cost base, meaning you don’t get the tax benefit.
A common mistake would be selling BCE at a loss and then buying it back a week later. That would be a superficial loss. Another mistake would be selling BCE and buying something the CRA could argue is substantially identical.
For example, Telus (TSX:T) is not considered substantially identical because it’s a separate business, but selling BCE and buying one of the new BCE single-stock leveraged covered call ETFs (why do these even exist???) may be considered substantially identical.
So if you want to keep telecom exposure while harvesting the loss, switching into Telus is fine. Rebuying BCE within 30 days is not. And if you want back into BCE eventually, just wait until the 30-day window fully closes to avoid a denied deduction.
The best tax-loss harvesting partner for BCE
If you’re executing this, consider: don’t replace BCE with another equally weak and indebted Canadian telecom (they’re all part of the same structurally flawed sector). Instead, deploy the proceeds into something stronger.
One example is the Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY), which offers a trailing yield of 3.5%, paid monthly, and has a 0.22% expense ratio.
Unlike BCE, this fund invests in diversified Canadian dividend stocks, has grown its payouts historically, and has outperformed the S&P/TSX 60 when dividends are reinvested.
