Canadian Taxes???

Discussion in 'Taxes and Accounting' started by ponzischeme, Dec 4, 2002.

  1. If one day trades for a living(hobby),what taxes will he pay?
    I searched other forums for the information.I could not find it.
    Thanks in advance.
     
  2. Well, is it for a living or for a hobby? It makes a difference. If you are trading for a living, your gains are treated as regular income and you pay your regular tax rate. All of your trading expenses are deductible. If you have a loss, you can deduct it against any salaried income you have, you might even be able to claim back against income from previous years, but I'm not sure on that.

    If it's a 'hobby' or just regular ol' investing, then stock trades are treated as a capital gain or capital loss. Taxes are calculated by taking 50% of your profit and paying your normal rate on that amount. Losses are not deductible against anything except other capital gains, but they can be carried forward, and claimed back against capital gains from prior years. You can't deduct trading expenses, but you can deduct the full amount of interest you paid, such as an investment loan or margin interest.

    BTW, if you are short selling or doing any derivitive stuff, your gains will be treated as regular income, since the government doesn't consider this 'investing'. I think some kinds of option trades can be accepted as capital gains, not 100% sure on the rules there.
     
  3. hi, i have been trading for yrs now and have always declared my gains(losses) as capital gains and not as income. revenue canada has to decide that my income should be in the regular income column and so far has not done so. so i'll wait for them to do it. i would just put it in the capital gains column and if revenue canada decides otherwise,oh well.might as well try.
     
  4. hi, i have been trading for yrs now and have always declared my gains(losses) as capital gains and not as income. revenue canada has to decide that my income should be in the regular income column and so far has not done so. so i'll wait for them to do it. i would just put it in the capital gains column and if revenue canada decides otherwise,oh well.might as well try.
     
  5. When you claim capital gains you have to include a list of all your transactions with your return. What if you average 50 transactions per day? The volume of your trades is definitely going to raise a red flag. If most of your income is from your trading activities, they'll look closer too. And you can't deduct your expenses. Plus if you get audited and they declare that you should be paying the regular rate, they will then go back to previous years and might do the same for them too. How big would the bill be if they said that all your previous capital gains shoud have been taxed fully? Don't forget to add the interest.

    But in the meantime, you are saving money.
     
  6. django

    django

    -If someone is trading eminis and short selling equities parttime(in the mornings for example), while working fulltime in a job would revenue Canada consider this a business and allow for the usual deductions - ie. equipment/office/educational materials.
    - Would weekly/monthly long position trades by this individual be considered income or capital gains - ie. is it possible to declare some trades as income(ie. emini and short sales) and others as capital gains? For example, if I buy IBM and long and sell a month later, then I would declare this as capital gains. If I then sold short IBM and closed a month later, then this would be considered income? The intent is no different from my perspective, but apparently it is to Rev Can. This could be messy.

    Once you declare your activity as a business income, then Rev Canada wants you to consistently report the same way from here on out. But they may not think you are active enough to declare your trading as a business, yet your short trades(and futures?) cannot be capital gains. I wonder how this gets resolved and what deductions are allowed for the non-professional short seller/futures trader to help offset the 40+% tax on these particular trades.

    I'm suprised how little information there on these grey areas. I phoned the agency in spring with some questions and had a student trying to answer my questions. She was very helpful, but the info is about the same as you can find online.
     
  7. Babak

    Babak

    Basically it comes down to how much balls and knowledge you have of the canadian tax laws (and what kind of lawyers you can afford).

    The CCRA is loath to pick a fight it may not win. So the best defense is to prove to them early on that you are not a sheep like 99.9999% of the Canadian public. Once they know they are dealing with someone in the know, they will tread carefully.

    Otherwise, God Himself will not be able to help you.
     
  8. lescor, i am not saying you are wrong. i thought the exact same thing that you have said and decided for myself to put it in capital gains instead of income. i just couldn't see having enough in deductions to make up the difference. if i make say 20,000 and pay a capital gains tax of 50%,i pay taxes on 10,000.so there is no way my expenses that i deduct are going to be 10,000. maybe i just haven't made enough trades for them to notice, or more likely,made enough money for them to notice.lol. i was trading stock options and have recently switched to futures.:D
     
    #10     Dec 8, 2002