Tag: tax

2024 Federal Budget: Capital Gains Tax

Posted on by [email protected]

2024 Federal Budget: Capital Gains Tax

In the 2024 federal budget unveiled on Tuesday April 16th, the Finance Minister said the government would increase the inclusion rate of the capital gains tax from 50 per cent to 67 percent for corporations and trusts. Individuals will still have the 50% inclusion rate apply on capital gains of up to $250,000 annually, but will now be subject to the 2/3 inclusion rate on capital gains in excess of $250,000 per year.

While the Feds claim this will only affect less than 1% of the population, we strongly disagree. This will negatively affect all people who own corporations with investments, (including most small businesses) discourage capital investment in corporations (hurting innovation productivity and entrepreneurs, and the jobs they support), all estates (leaving less for their families and future generations), and all individuals with one-off significant tax events (who may be hard working, rather than idly rich).

Why is the change important?

The proposed 2/3 inclusion rate applies only to capital gains realized after June 25, 2024. That means there is a short time window to decide if unrealized gains should be realized now.

If you have significant capital investments (whether in a corporation, trust, or held personally), we recommend a consultation with one of our tax professionals to better understand the implications of this new policy on your investments, and discuss possible planning opportunities. Please note that these proposed policies are new and complex and we are watching it unfold. Our team will need some time to engage with more advanced commentary coming out from the government and tax community in the coming weeks before we can comprehensively consult in all circumstances.

If you have personal investments outside your RRSP or TFSA, you will want to analyze your portfolio to assess changes in taxation and strategy. For investments in an unrealized gains position, you may want to sell in advance of June 25 to take advantage of the existing lower tax rates on amounts over $250,000. You will also want to consider the timing of selling to limit gains in any one year to $250,000 to protect your gains from higher taxation. If you are in a loss, you may want to defer the losses until they are included at the higher rate.

If you hold a second property that you are looking to sell, you may want to crystallize a gain before June 25th to avoid higher taxes on the disposition of the property.

If you hold investments in a corporation that you are carrying at a gain, we want to consider the circumstances under which it would be advantageous for you to sell those investments, taking advantage of the 50% inclusion for taxes, and the 50% inclusion into your Capital Dividend Account (cash that can be paid out tax-free later).

Additionally, any corporations that are selling assets to reinvest in their business (by redistributing those funds into a different business or product line) will need to revisit planning for higher corporate tax rates on corporate investment dispositions, and we are happy to help with that forecasting.

For anyone with estate planning, we have a short window of time to consider changes required to recalibrate the tax exposure in the year of death where dispositions often exceed $250,000.

If you are concerned for your tax planning, we encourage you to reach out via email, and we look forward to helping you plan for your future.

Let’s look at the math:

Let’s say you’re a BC professional and part of your financial strategy is to create savings in your small corporation and draw down that corporate investment portfolio to fund your cost of living as needed. Following your annual income strategy, you examine your personal needs: with the increased cost of borrowing (interest) and groceries, kid camps etc you determine you need to sell part of your portfolio, which will trigger a $50,000 CAD capital gain. See below for our analysis and walkthrough. Under the current rules, we pay 29.50%. Under the new rules, our tax rate increased by 10%. That’s 34% more taxes! For someone who takes home an extra $30-35k a year…Capital Gains Increase 2024

Technical Walkthrough

Current Rules:

  • Under the current rules, half is taxable. And half goes to the capital dividend account (CDA), which can be withdrawn tax-free as a capital dividend. We now have $25k of tax-free gains, and $25k of taxable gains.
  • The taxable half is subject to two different taxes- one permanent , and the other refundable. 
    • On this transaction, you will pay 20% or $5,000 in permanent tax. Just like it sounds, you pay this, and you can’t get it back.
    • You will also pay 30.67% or $7,667 in refundable tax. You can get this back by paying yourself a non-eligible dividend. (You recover 38.33% of the refundable tax for every dollar paid out as a non-eligible dividend.)
  • So far in this scenario, there has been approximately $12,667 in total taxes paid. Now, we have to get back the refundable tax. 
  • To trigger a full refund, you need to pay a non-eligible dividend of $20,005 to get the refundable portion back ($7,667/38.33%). So, you pay out that refundable tax as part of that $20,000 dividend, and that dividend is taxed to you personally. 
  • In BC, at the top rates, a non-eligible dividend is taxed at 48.9%. That leaves us with $10,220 after tax, plus the $25k tax-free dividend.

In the end, we triggered a $50k capital gain and you had $35,220 left after tax. That’s an effective tax rate of about 29.50% on our capital gain.

Proposed Rules*:

*note, these rules are newly released and not thoroughly communicated by the Federal Budget. Specifically Refund Dividend Tax on Hand, Alternative Minimum Tax, and the new proposals for integration under the income tax act are not clear. This is for analysis purposes only. 

  • Under the proposed rules, instead of half of the capital gain being tax-free, now only 1/3rd of it is. This changes the outcome significantly. Now a $50,000 capital gain gives us only a $16,667 tax-free capital dividend, and we include $33,333 in corporate income.
  • The taxable half is subject to two different taxes- one unrecoverable, and the other recoverable.  
    • 20% is permanent, so $6700 tax paid
    • 30.67% is refundable, and you pay $10,273 in refundable tax.
  • So far in this scenario, there has been approximately $16,666 in total taxes paid.  Now, we have to get back the refundable tax. 
  • To trigger a full refund, you need to pay a non-eligible dividend of $26,800 to get the refundable portion back ($10,273/38.33%). So, you pay out that refundable tax as part of that $26,800 dividend, and that dividend is taxed to you personally. 
  • That dividend is taxed at 48.9%, leaving $13,694 after-tax, plus the $16,667 tax-free dividend.

In the end, we triggered a $50k capital gain and you had $30,194 left after tax. That’s an effective tax rate of about 39.6% on our capital gain.

Under the current rules, we paid 29.50%. Under the new rules, our tax rate increased by 10%. That’s 34% more taxes!

If you are a Metrics client and would like to book a consultation with your tax advisor, please email [email protected]. If you are not currently a Metrics client, CLICK HERE to complete our contact form for new clients.

Disclaimer: Any tax information published on this blog is based on the facts provided to us and on current tax law (including judicial and administrative interpretation) during the time of publication. This does not constitute legal advice. Tax law can change (at times on a retroactive basis) and these changes may result in additional taxes, interest, or penalties. Practice due diligence and if in doubt, speak with a member of our team.

New GST/HST Guidelines for NFT Sales

Posted on by [email protected]

New GST/HST Guidelines for NFT Sales

Despite what many sites advertise, yes, NFTs are subject to GST/HST.

The Excise Tax Act in Canada imposes GST/HST on “every recipient of a taxable supply made in Canada”, and Canada Revenue Agency (“CRA”) has recently provided updated guidance which clarifies that NFTs, specifically, will be subject to GST/HST.

NFT sellers are obligated to collect GST/HST from Canadian buyers if they earn more than $30,000 in annual gross revenue. This means that Canadian NFT sellers who earn more than $30,000 in sales of NFTs are required to register for GST/HST and pay these taxes to the CRA.

Under CRA guidance, unless you can prove that the sale of your NFT is made outside Canada (which, given the anonymity of the marketplace, is unlikely) you will be taxed as though you sold to Canadians and collected GST/HST on your gross sales. Since you cannot identify the geographical location of your buyer you will be deemed to charge and collect GST/HST in your own province.

Why is this guidance a big deal?

Under the current Excise Tax Act, sales made to non-Canadians buyers, who do not use the asset in Canada, are not subject to GST/HST. Until now, and given the international nature of NFT sales, NFT sellers may have been assuming that all or substantially all of their sales were international, and therefore exempt sales under the Excise Tax Act (this assumption could have been supported by online knowledge of the buyers, the geographical location or mix of the online marketplace or other factors). Now, this interpretation has specified that in the absence of proof of your buyer as OTHER than Canadian, the CRA will assume they are Canadian and have GST/HST apply on 100% of your gross sales.

Furthermore, as a buyer, since you cannot identify the seller as Canadian or otherwise, and without a GST number for your purchases, you will not be eligible to claim GST/HST paid on your cost of sales for the NFT transactions.

If your NFT portfolio did not net more than your provincial GST/HST rate, you could end up in a deficit and still owe GST/HST to CRA. This is specifically relevant in Ontario and the eastern provinces that have HST of 13-15%, as the GST/HST rate charged is a direct cut off of your profit.

These excise tax considerations are the same whether the NFT sales are classified as business or capital under the Income Tax Act. Technically, for excise tax this creates a GST/HST Collected obligation for the seller in the absence of GST Paid offsetting tax credit.

Functionally, for the industry this creates a cycle where GST/HST is paid on all transactions in the Canadian NFT industry and claimable on none. Regulators view it as the downside of participating in an anonymous ecosystem. Many view it as an assault on the NFT industry in Canada.

At Metrics, we believe this interpretation creates a strong disincentive for NFT businesses to continue to operate in Canada, and especially in provinces with HST. We will continue to work with regulators including the CRA to clarify NFTs as emerging digital assets that deserve unique interpretations under the Income Tax Act and Excise Tax Acts. Until change comes, we are dedicated to working with our clients to accurately interpret the tax laws as they apply to Canadian businesses.

For all Metrics clients, we will be working with you to establish the effects of this interpretation on your portfolios.

Planning opportunities

For planning purposes, we note the following opportunities and exemptions:

• If your NFT assets are not available for sale in Canada, the impossibility of Canadian sales will exempt those sales from Excise Tax.

• If you know the NFT purchaser, and can obtain a legal address, and that legal address proves them as non-Canadian, your sales will be exempt from GST/HST.

• If there are other pressing business reasons and regulatory considerations putting pressure on your NFT business, you could consider departing from Canada. This is a major tax event that would need to be examined carefully prior to being executed.

• In our considerations of NFT activity the only current and obvious case for exemption is NFTs issued for purposes of liquidity pool ownership and same or similar mechanisms that do not satisfy the criteria for a taxable supply under the Excise Tax Act.

• Given that tax considerations are not currently built into NFT smart contracts, the amount that a seller collects will not vary. This means that NFT sellers either have to raise their prices by 5-15% (depending on your provincial GST/HST rate), or have to plan to take that same 5-15% off the top of your sales and remit the cash to the CRA.

How does this compare to similar TradFi transactions:

In traditional finance transactions, say a BC company sells two pieces of art for value of $100,000 CAD each: Art Sale 1 is to a Canadian business in Victoria BC, and Art Sale 2 to an American business in Los Angeles.

Art Sale 1: Art sold to Canadians: The price is $100,000 and GST applies on the sale of the art. In this case GST of 5% or $5,000. The seller would collect $105,000, keep $100,000 and collect and remit $5,000 to the government for GST Collected.

Art Sale 2: Art sold to Americans: The price is $100,000 and this is an exempt transaction for GST/HST. The seller would collect $100,000, keep $100,000 and collect and owe $0 to the government for GST.

In other words, the TradFi system is set up to identify all sellers and buyers and share that information. This exchange of identity allows this system to work under the current regulations.

Now let’s examine this for NFT companies, say a BC company sells two pieces of NFT art for a value of $100,000 CAD each. No identification of the buyers is available, and in the absence of availability in Canada, the NFT is deemed to be sold to a BC company and 5% GST is required to be charged on the transaction.

Art Sale 1: The price is $100,000. The seller would collect $100,000 which would be deemed to be GST inclusive at BC’s rate of 5% or $4,762. The seller will keep $95,238 and remit $4,762 to the government for GST.

Art Sale 2: is the same as art sale 1: The price is $100,000. The seller would collect $100,000 which would be deemed to be GST inclusive at BC’s rate of 5% or $4,762. The seller will keep $95,238 and remit $4,762 to the government for GST.

Income Tax Effect

Example 1:
Assume you live in Ontario, and you bought a BAYC for $100,000 CAD (equivalent in ETH), and sold it for $120,000 (equivalent in ETH at time of sale). You may have thought you made $20,000. However, based on the GST/HST discussed above, you would owe $15,600 in HST, making your net profit $4,400 (less gas costs, exchange fees, etc), rather than $20,000. When you pay the HST on this transaction, it reduces your profit for income tax purposes, so you would only pay income tax on the profit of $4,400, rather than the $20,000 pre-HST amount.

Example 2:
If you bought a BAYC for $100,000 CAD (equivalent in ETH), and sold it for $1,200,000 (equivalent in ETH at time of sale) in Ontario, you would owe $156,000 in HST, making your net profit $944,000 (less gas costs, exchange fees, etc), rather than $1,100,000.

So, regardless of the price/profit when sold, the HST has the same effect. You would pay income tax on the net profit only, after the HST has been considered.

Learn More from Metrics

The digital world has witnessed an exciting and revolutionary development: the rise of non-fungible tokens (NFTs). Unfortunately, the cutting-edge nature of NFTs means that many NFT makers, buyers, sellers and investors are unaware of their tax obligations. Additionally, interpreting the current and evolving regulatory landscape can be extremely complicated. If you are looking for answers regarding NFTs and Canadian taxes, you can learn more by contacting us at [email protected].

If you need help navigating NFT taxation and reporting, CLICK HERE to book a consultation with our team.

Disclaimer: Any tax information published on this blog is based on the facts provided to us and on current tax law (including judicial and administrative interpretation) during the time of publication. This does not constitute legal advice. Tax law can change (at times on a retroactive basis) and these changes may result in additional taxes, interest, or penalties. Practice due diligence and if in doubt, speak with a member of our team.

Underused Housing Tax (UHT)

Posted on by [email protected]

Underused Housing Tax (UHT)

To combat the housing crisis, effective January 1, 2022 the Federal Government introduced the Underused Housing Tax (UHT) which requires certain non-Canadian owners (and, in certain circumstances, some Canadian owners) of residential property in Canada to file an annual return to report their ownership and, subject to certain exemptions, pay a 1% tax on the property’s value (the UHT).

With the 2022 filing deadline of April 30 approaching, we want to ensure residential property owners are well informed.

Filing Requirements

If you own residential property situated in Canada, you must file a UHT return (form UHT-2900) by April 30 each year, unless you are an excluded owner.

Residential property includes (but is not limited to):

  • Detached houses
  • Semi-detached houses
  • Rowhouse Units
  • Condomonium units

An excluded owner is defined as:

  • An individual that is a Canadian citizen or permanent resident
  • A Canadian Corporation that is publicly traded
  • A registered charity
  • A cooperative housing corporation
  • Municipalities, Indigenous governing bodies, governments
  • Trusts that are publicly traded
  • Certain public service bodies (e.g. universities).

If you meet any of the above criteria, you are an excluded owner and do not have any filing obligations. If you do not meet any of the above criteria, you must file the UHT return and assess yourself for the tax owing. The deadline to file for the 2022 tax year is May 1, 2023 (as April 30 falls on a Sunday this year).

Note: this means if you own residential real estate held by a private corporation, you are required to file the UHT return.

Exemptions to the tax

The Government of Canada has provided some exemptions to the UHT. If you fall within the exemptions listed below, you will not be liable for the tax, but you will still be required to file the UHT return.

1. Primary Residence
The principal residence of the individual, their spouse or common-law partner, or their child who is attending a designated institution (university) is not subject to the UHT.

2. Qualifying Occupancy
A qualifying individual must occupy the property for at least one month and a total of 180 days/6 months in a year. A qualifying individual is:

  • An arm’s length individual with a written rental agreement in place
  • A non-arm’s length individual with a written rental agreement in place, and the rent is not below fair rent for that property
  • An individual owner, their spouse or common-law partner, who is in Canada for work under a Canadian work permit, and who occupies the property for that purpose
  • An individual owner, their spouse or common-law partner, parent, or child who is a Canadian citizen or permanent resident.

3. Vacation Property
The property is located in an eligible area of Canada and used by the owner, their spouse or common-law partner for at least 28 days in a year. You can verify if the property is in an eligible area at the Government of Canada’s Website.

4. Specified Canadian Corporation
A corporation that does not have foreign shareholders (either other foreign corporations or individuals) that own 10% or more of the votes and value of the corporation.

5. Specified Canadian Partnership
Each partner of the partnership, on December 31, is an excluded owner or a specified Canadian corporation as described above.

6. Specified Canadian Trust
Each beneficiary that has a beneficial interest in the trust is an excluded owner or a Specified Canadian corporation, as mentioned above, on December 31.

7. New Owner
An owner when they first acquired the property during the year and did not own the same property at any time during the nine prior years.

8. Death of the Owner
The owner died in the current or prior year, the personal representative of the deceased owner who did not own the property in prior years, or a co-owner where the property was co-owned by the deceased that held at least 25% of the property.

9. Availability of the Property
UHT is not applied if the property is:

  • Under construction and not substantially completed
  • Construction is done after March, and the property is put for sale to the public
  • Not suitable to be lived in
  • Uninhabitable due to disaster or major renovations.

If you do not meet any of the exemptions in this listing, you will be charged UHT.

Calculation of the UHT

The UHT is calculated at the rate of 1% on the taxable value of the property, which is generally the greater of (a) its value as assessed by a government agency; and (b) the property’s most recent sale price on or before December 31 of the calendar year.

Alternatively, a person may elect to use the fair market value of the property at any time on or after January 1 of the calendar year and on or before April 30 of the following calendar year. The fair market value must be supported by a written appraisal and provided to the Canada Revenue Agency upon request.

Penalties

Be sure to file the UHT on time. If you do not file the UHT, the penalties are the GREATER of:

  • $5,000 for individual owners,
  • $10,000 for non-individual owners (corporations),
  • The total of:
    • 5% of your UHT payable for the residential property for the calendar year, and 
    • 3% of your UHT payable for the residential property for the calendar year, multiplied by the number of complete calendar months that the return is past due.

The penalties are in addition to any amounts owing from the UHT return and apply even if you do not owe any tax.

If you are still unsure about whether you need to file a UHT return (UHT-2900), or if you need any help filing your returns, contact us to book a meeting with our team.

Disclaimer: Any tax information published on this blog is based on the facts provided to us and on current tax law (including judicial and administrative interpretation) during the time of publication. This does not constitute legal advice. Tax law can change (at times on a retroactive basis) and these changes may result in additional taxes, interest, or penalties. Practice due diligence and if in doubt, speak with a member of our team.

Tax Planning Opportunities for your 2022 Year End

Posted on by [email protected]

Tax Planning Opportunities for your 2022 Year End

What a year 2022 has been, and it is already coming to an end! It’s not too late to consider your personal and corporate tax planning, sneak in some tax savings, and be prepared for the upcoming tax season. 

Below are some considerations to help manage your tax costs. Metrics CPA can assist you with your tax planning needs by helping you review longer-term objectives and opportunities to enhance tax efficiency to bring about greater overall protection.

Withdrawing Money

You may have taken funds out of your corporation for living expenses or plan on extracting a large sum for other expenses (vacation, home renovations, or anything else). How you withdraw your funds has tax consequences which may not be as straightforward as some might perceive, and the details matter.

It is essential to discuss compensation strategies with your tax advisors. We would be happy to have that discussion with you to determine what’s best for you and how to avoid any pitfalls.

Incorporating your Business 

There are many reasons to incorporate. In addition to reducing your tax bill, here are some reasons to incorporate:

  • Those that are mining cryptocurrency, high-frequency traders, or are actively margin trading consistently
  • Those who earn more in their business than they need personally to live
  • Those looking to segregate their personal assets and business
  • Those looking for creditor proofing and limited personal liability
  • High-income earners or high-net-worth individuals that also have investment income

Speak with one of our advisors to see if incorporating is right for your situation.

Realizing The Losses on Investments

The tax-loss harvesting strategy is a tool that can help reduce your overall tax and may even help recuperate prior year taxes paid. If you had capital gains in 2022, 2021, 2020, or even 2019, you can consider selling assets in a loss position to offset these gains. 

Should you choose to undertake the tax-loss strategy you should be aware that rules (known as the superficial loss rules) may apply to deny losses on certain dispositions of property. Essentially, the loss will be denied if you (or your spouse/common-law partner or a company you or your spouse/common-law partner control) repurchase the same or similar asset within 30 days of the disposition. 

While tax-loss harvesting may not restore an investment to its previous position, it can lessen the severity of the loss if the strategy is applied correctly and in appropriate situations.

Immediate Expensing for Depreciable Property 

Is your company considering acquiring assets in the near future? In that case, you may qualify for immediate expensing for tax purposes up to a maximum of $1.5 million per year if the eligible assets are available for use before January 1, 2024. 

Eligible assets available for immediate expensing would be capital property that is subject to the capital cost allowance (CCA) rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long-lived assets.

Using Your Personal Deductions 

Remember your other registered accounts, such as registered retirement savings plan (RRSP) and tax free savings account (TFSA).

  • If you have room in your RRSP, contributions must be made on or before March 1, 2023 to qualify for a deduction for your 2022 tax return. 
  • Contributions to a TFSA are not deductible for income tax purposes. However, any capital gains and/or income earned in a TFSA are generally tax-free, even when it is withdrawn.

If you are interested in learning more about any of these strategies or have any questions in regard to optimize your tax planning, contact us to book a meeting with our team.

Disclaimer: Any tax information published on this blog is based on the facts provided to us and on current tax law (including judicial and administrative interpretation) during the time of publication. This does not constitute legal advice. Tax law can change (at times on a retroactive basis) and these changes may result in additional taxes, interest, or penalties. Practice due diligence and if in doubt, speak with a member of our team.

Tax Loss Selling (updated for 2023)

Posted on by Oliver Nelson

Tax Loss Selling (updated for 2023)

‘Tis the season for tax loss selling

To ensure you are efficiently planning for the 2023 year end, we recommend reviewing your investment positions before the end of the year. If you have realized any capital gains from the sale of securities in non-registered accounts or from the sale of cryptocurrencies on account of capital, you might want to consider the strategy of tax loss selling (or selling your ‘losing’ positions to offset some of the gains).

The gist

Selling loss positions allows you to realize that loss in your portfolio. This is called a capital loss. These losses are tax assets as they offset capital gains in your portfolio (capital gains can only be reduced by capital losses).

If you have realized gains in the last three years (the limit on carrying back capital losses to apply against capital gains), selling losing positions before the end of 2023 will allow you to carry back the loss to one of the previous three years, resulting in a refund on the tax paid relative to the losses carried back. If you have capital gains realized in 2020, this is the last year to carry back losses and get refunded some of the tax you paid on those gains. You can carry forward capital losses from prior years indefinitely. 

If you have a portfolio with gains in any of the past three years, it may be beneficial to dump some of your ‘loser’ assets to reduce your taxes owing. 

Examples of tax loss selling

EXAMPLE 1: Current year gains and current year losses:

You have realized gains on the sale of some ETH of $50,000 in the current year. You also hold a position in a crypto project DOG that dropped in value during the year from $60,000 at cost down to $10,000, its current fair market value. Selling the DOG position at a $50,000 loss will fully offset the $50,000 gain realized earlier in the year from ETH.

This is a simple example that would be advisable if you felt the losing position was a lost cause and wanted to exit the position regardless. Other considerations here would be gas fees to exit the losing position. If the offsetting loss were much less and the benefit would be lost to gas fees, it would not be worth it to exit the position.

EXAMPLE 2: Prior year gains and current year losses:

You sold some shares of AAPL at a gain of $30,000 in 2021. Your investment advisor recommends “balancing” your portfolio according to your risk tolerance and long-term plan, and exiting certain positions. Any losses from the rebalancing can be carried back to 2021 to offset the gains from AAPL in that year, resulting in a refund of some of the tax paid in 2021.

Traps to avoid

Superficial loss rules

If you were to attempt to crystallize losses by selling a security or cryptocurrency, but then want to reenter the position, you must wait 30 days from the sale to the next purchase, otherwise you will be caught by the superficial loss rules. If a superficial loss is reported, the loss will be denied for tax purposes and  will be added to the cost basis of the new position, effectively negating any tax benefit until you exit the new position. These rules apply to assets repurchased within 30 days be any “affiliated person” (spouses/common law partners, corporations controlled by you or a spouse, or trusts in which you or your spouse are a beneficiary).

EXAMPLE 3: Superficial losses:

On December 19th, 2023 you sold all your position in ETH which had a cost of $10,000 for $6,000 triggering a capital loss of $4,000. On Jan 2, 2024, you repurchased the same amount of ETH back for $6,000. As you repurchased the ETH back within 30 day, the superficial losses rules will deem your loss in 2023 to be NIL and the cost base of the repurchased back to $10,000 ($6,000 cost + $4,000 of superficial losses).

Identical Property

The superficial losses apply even if you buy an identical property. Generally, properties are identical if they are the same in material respects, and general buyers would not prefer one property to the other. A common example is buying shares of a corporation vs units of a mutual fund trust are viewed as identical properties.

Registered accounts

Losses from transferring securities to a registered account (RRSP, TFSA, etc) are denied under the Tax Act. If you wish to transfer an asset from a non-registered account to a registered one, it is best to sell the security and realize the loss in the non-registered account (allowing for the loss to be applied against gains), then waiting the 30 days to repurchase the asset in your registered account to avoid the superficial loss rules.

Foreign exchange

A position in a US security may be in a loss relative to the USD cost basis and the current USD fair market value, however depending on the exchange rate, the position could potentially be flipped into a gain position. Be sure to translate both the cost basis in CAD, and the expected proceeds in CAD to determine whether a US denominated security is truly in a loss position. 

The Skinny

If you have losers in your portfolio and gains that have been realized, the settlement date of the sale of the losers must be before December 31, 2023 to fully realize the losses for tax purposes. If you have a portfolio with gains in any of the past three years, it may be beneficial to dump some of your ‘loser’ assets to reduce your taxes owing. It literally turns a loser into a tax asset.  Something from nothing- that feels more like the holiday spirit. 

 

Disclaimer: Any tax information published on this blog is based on the facts provided to us and on current tax law (including judicial and administrative interpretation) during the time of publication. This does not constitute legal advice. Tax law can change (at times on a retroactive basis) and these changes may result in additional taxes, interest, or penalties. Practice due diligence and if in doubt, speak with a member of our team.