Fair Accounting of Capital Losses

As previously posted, fiscal laws are messy. Not only that, but some are unfair in the sense that they penalize low-income taxpayers. Capital losses are a very good example of this. Using the settlement method (which is the standard method used to calculate capital gains and losses on shares in Canada), the value of securities is only taken into account when an individual executes transactions. Though this method has the advantage of being very simple, minimizing tax liability with it requires a crystallization of losses through actual transactions. When dealing with shares, such transactions cost about 20$ per security (plus management fees).

Individuals with valuable portfolios can crystallize losses on a daily or monthly basis, maximizing their capital losses at all times, whereas their poorer compatriots can't afford 20$ per crystallization (this number may seem low, but someone who owns many different securities will see the 20$ multiplied by the number of securities that he holds).

Since market data can easily be collected for actively traded securities, I would recommend amending the capital taxation laws so that losses are automatically crystallized without needing to sell and buy back the securities for any holding of less that 0.1% of the outstanding number of that security. An even better method would be to bring transaction costs down to 0$, but that's more complicated.