Let’s face it! Most Canadians probably find income taxes boring (unless of course, you’re an accountant!). But paying your income taxes is a necessary evil!
If you have sold stocks or other investments at a profit, you will have to pay the tax on your capital gains.
A Quick Note About Your RRSP or RRIF
If you have stocks or other investments inside of your RRSP or RRIF, any gains generated on those investments are not taxable. However, withdrawals are fully taxed at your marginal tax rate at the time you withdrew from the account.
Remember that the government wants you to save for your retirement using the RRSP and allows you to deduct deposits and allows your investments to grow tax-free … until you withdraw from the account: And hopefully in a lower tax bracket.
What About The TFSA?
Like an RRSP or RRIF, investment income in the TFSA will grow tax free. However, there are no tax consequences if you deposit or withdraw from the TFSA.
From here on, I will refer to the RRSP, RRIF, and TFSA collectively as registered accounts.
What Is A Capital Gain?
When you sell your stocks, in a non-registered account, for more than you paid for it, the difference between the selling price and purchase price (less commissions) is called a capital gain. In Canada, capital gains offer a tax advantage because only 50% of the net capital gains are taxable.
Notice the phrase net capital gains?
If you had capital losses in the tax year, you are required to offset them against your capital gains from the same tax year. If you have losses left over, you can use them against any net capital gains in the last three years or use them against any capital gains in the future. However, you cannot use capital gains against other income (interest, diviends, employment income etc.).
If you dispose of the shares of a qualified small business corporation or qualified farm property you can shield $750,000 of the gain from tax! ?In 2007 government in increased the lifetime capital gains exemption to $750,000.
Watch Out For Superficial Losses
If you’re frequently buying and selling stocks and you have losses, be aware that if you (or a person related to you), owned the same stock 30 days before or after you sold the shares, your loss will be denied. You should read my article on Superficial Losses for more on this.
Tax Tips For Capital Gains
- Maximize Tax Efficiency – Keep your capital gains generating investments outside of your registered accounts and your interest generating investments inside your registered accounts.
- Tax Loss Sell – If you have shares that have lost value at the end of the year, consider selling them to offset and capital gains. Be aware of the superficial loss rules.
Related Articles
- Applying Capital Losses Against Capital Gains
- Take Advantage of Your Capital Losses
- Canadian Stock Market Gains & Cost Basis
- Capital Gains & Losses On Money Market Funds
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I sold some stocks this year that I purchased last year, all sales generated a profit. I’m confused about whether or not to report anything in the Adjusted Base Amount column, though. If I purchased these stocks in 2009 and sold them in 2010, should I have already reported the purchase as a Capital Loss? I have looked at my tax return from last year, and it doesn’t look as if I did that.
You’re preparing your 2010 tax return and only report gains or losses realized in 2010.
If the taxable portion of capital gains on stocks is 50 percent – are the losses 100% or 50%?
Losses are only 50% claimable.
In 2000, me and my mother bought a house in Montreal (Quebec) (my mothers name was on the deed only for purposes of allowing the morgage) and we were both considered 50/50, but she did not live in my house (she had her own one street away). My mother was only on the deed since I was young and the bank would not have granted the morgage if I was the only owner (did not have kids and husband at that time). In 2007, I finished paying the morgage + had 3 kids and a husband and so my mother transfered all her share to me (got out of the deed) to avoid trouble and since it was no longer required (debt to bank was over).
Now in 2011, we received a letter from Revenu Quebec saying that my mother should pay for the capital gain (when she sold her share for 1$ to me in 2007). We bought the house for 140k, then when she got out in 2007, it was valued at 280k (140k in gross gain). Her share is 70k so basically, she is taxed on that 70k. I don’t think this is fair, since I am the one paying the morgage, the taxes, all the improvements to the house, so her capital gain should not be half, right? In fact, she did not make any gain (she never got paid; she was doing me a favor). Is there an exemption for this kind of transaction? What can I deduce from the 140k gain (taxes paid to the city 35k all those 7 years, improvements to the house 50k, insurance 3.5k?) These are thing that I paid, so why should the government consider her 50% of the gain, when I made all the payments? We are still living in the house (kids, husband) so we never sold it to make any profit, so why should she have to pay?
Thanks for your help
I assume Revenu Quebec’s position is that your mom was a legal owner of the property and when she transferred ownership, it was deemed sold at fair market value. If someone owns property and sells it for more than it’s cost, they must pay a tax on the gain.
I can tell you what the common law treatment is in the rest of the country, but not in Quebec. I would suggest speaking with a local tax professional.
Hey Tax Guy, I owned a 10% share of a lakefront cabin in Alberta with my sister and her husband owning the other 90%. The purchase was made in May of 2008. In June of 2010, they bought out my share for exactly the same price as what I paid for it. I made no profit and incurred no loss. Do I have to report that on my tax return for 2010 and if so, how does it get reported correctly?
The transaction should take place at fair market value and the gain or loss is deemed to be what the difference between your cost and FMV. You report the gain or loss on Schedule 3.
Hi Tax Guy, this is an awesome site!
My husband recently bought out his 50% partner in a rental property. The property was originally bought for 275,00 and the partner was bought out at 212,500 (Assessed value was 425,000). They have claimed CCA on this property.
Is their any tax implication on the purchase of the extra share for my husband?
Secondly, the value of the property after depreciation is only 50,000. So if my husband sells the property now at say 500,000 what will be the taxable amount and how is it calculated?
Your husbands cost is what he paid for the property. From the sounds of it, his cost is [(0.5) x 275,000] + 212,500.
The purchase means his cost base increased.
The CCA is irrelevant. Your husband claims his one CCR on is portion of ownership and the other owner claimed their own. CCA is not something that is pooled.
I hope this helps.
Thank you for your response. My husband would like to know how to fill out the tax form on this matter.
In 2006 the CCA value of the above property was 50,000. In 2007, he had taken a new mortgage on this property and its for 300,000. So, how & where does he record the new value of the property on the tax form for 2007?
Secondly, the interest recorded on the tax form for 2007 is 14,000 compared to interest expense of 7,000 in 2006.. Does this additional financing on the property trigger any tax implication?
Jan,
I can only provide general guidance here and cannot provide specific advice. I does sound like the situation has become complex and I would suggest he hire a professional accountant (or at least a competent tax preparer) to clean things up for the next year or two. The it should be just fine on a go forward basis.
HI, I have a managed investment account with a bank, and received the Realized Gain/loss summary. In the summary report, it listed out all the sell type transactions. Which form should I use to report this? Do I need to copy these transactions out one by one and report in the Income tax or can I just take the total and report in Income Tax? Thanks in advance!
Capital gains and losses are calculated on a security by security basis. So you’ll have to do the calculations for each security.
Hi,
I have a K-1 tax form for owning ProShares shares. On it, I have a short term capital gain (loss) of -82.66 USD and I have what is shown as Part III 11 C Other Income (Loss) of -223. Under Part III 13, I also have Other Deductions of 2.
I’m not sure how to report any of this. Can you please advise? Note that the -223 and the 2 deduction amounts to 225 which is also shown in Part II section L Current Year’s Increase (Decrease). How do I report all of this?
(All amounts have been USD).
THANKS A BUNCH I’m a little late in doing my taxes so any help will be greatly appreciated. Thanks!
If an individual has sold his share of the home to a former spouse and generated a capital gain in the home that he no longer lived in for several years.Can you offset the capital gain paid and or to be reported via an RRSP?
thank you for responding to this inquiry.
I have a condo unit which which I rent it out since 2009. I always file my Income Tax dilligently year after year. I am a Canadian and I wanted to sell the unit this year. If capital gain is generated, say $50,000, how much would be the capital gain tax due for payment?
The taxabale portion of capital gain is 1/2 the gain. It works just like investments.
If you have a capital gain that is taxable, you can offset the gain by making an RRSP contribution.
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