Canadian trading tax

Discussion in 'Taxes and Accounting' started by Grinder, Dec 29, 2011.

  1. Grinder


    I'm confused so would like to hear from any knowledgable traders on the matter of tax and trading in Canada. I have searched the net, spoken to a CRA rep and received info from my accountant but all seem to conflict one another in one way or the other.

    As a permanent resident of Canada I'm an individual F/T trader conducting the buisness of trading. I am aware I am subject to report gains/losses from my day trading activity and fall under a daytrader status which has me taxed as income not CG, so at the end of the year I will report my figure of P/L.

    What I'm confused about is the Mark-Market election. Is this applicable to individual traders?
  2. I'd like to know more about this as well...

    From what I understand (and how I've been filing so far...)

    You can submit the yearly net profit (loss) on your trading as capital gains returns. HOWEVER, if the CRA decides that trading is a business activity for you (ie, your primary source of income, few other considerations) then you'll be asked to file it as business activity.

    Now, I could be wrong, and I really want to know more regardless.
  3. Grinder


    I've pretty much got clarification that I'll be able to file as a buisness of trading due to the frequency and nature of my trades which means it's just reporting the P/L for the year, apparently thats the equivalent of 'Mark-Market' nomination.

    Apparently there is cut off date though, which happens to have already passed.

    Any insight would be much appreciated.
  4. dexter_ES


    I'm curious about this as well but don't have any additional insight to provide unfortunately.

    Are you filing as an individual or have you setup a business for your trading income?
  5. Grinder


    As an individual conducting a buisness of trading. I meet the criteria to be deemed as day trader status and apparently you don't need a buisness name
  6. I've been filing as a professional trader in Canada for over 14 years. My advice would be of course to get a good accountant. I have been filing as a non-incorporated business. You get to deduct what you want like a business but you don't get to defer your income.
    I'm not sure what the rule is on mark to market vs realized profits but I think if you are consistent it doesn't matter. Again ask an accountant who knows these things. I have been audited over 6 times and nothing ever came out of it. From my experience the government has no clue about this stuff. Especially different accounts, currencies financial products etc.

  7. Grinder


    thanks for that bit of info. It's the first time I heard the term unincorporated buisness, I'm new to the Canadian system and my accountant didn't mention it.

    Is it just another way of saying you are operating a buisness of trading and therefore taxed as an income instead of CG? If so is it the preferred method for F/T traders in Canada?

    Thanks for your reply
  8. Yes thats what it means. I'm not sure if that is the preferred way. I know others who are incorporated. It is the specialty of a tax lawyer more than an accountant. There are many details that make this complicated. One of them is to sell the idea that your trading is considered "active" vs "passive" income. Income from financial investments no matter how frequent are considered passive unless you have a minimum of 5-6 employees.
    Trading your own money you have no employees and no customers or clients. What kind of business is that? That being said I have a tax lawyer friend who has been telling me to do it for a while. Assures me it would save me money.

  9. Grinder


    Thanks heaps. Food for thought.
  10. "The combination of the following factors may result in gains and losses being
    treated by the CRA as income and thus be subject to full tax:
    - Frequent and extensive buying and selling of securities,
    - Short periods of ownership,
    - If you have some knowledge or experience in the industry you are investing,
    - If you spend a lot of time studying the markets and securities,
    - Your buys and sells of securities form part of your regular business,
    - You use margin or debt to finance your purchases,
    - You advertise yourself as an investment broker,
    - Your purchases appear to be speculative or the securities do not pay dividends"
    #10     Jan 6, 2012