It may almost be tax season, but it is definately lacrosse season! I have been doing my part to convert everyone I can to be Roughnecks fans!! (Two games at the saddledome this weekend if you are looking for something to do Feb 2 & 3. We will also be running a giveaway for 2 tickets to the February 24th game against the Philedelphia Wings in a seperate mail out 🙂
Well onto tax related stuff – in this newsletter I will be providing you some information about investing through your TFSA, and RRSP. Since Brenda won’t share her big book of accountant jokes, I am running a little contest. We are giving away a basket of wine!
| Identical Properties Rule Our first topic we are going to cover has to do with buying and selling the same shares in a short period of time. This is something we have been getting some phone calls about. This rule states that you cannot buy and sell the same property or shares within a 30-day period to realize a loss on that property. Any “artificial” losses created by selling these shares and the rebuying them will be disallowed by the CRA. |
Attribution Rules
These are complex and were written to restrict income splitting between spouses and with children. An example would be buying stocks with your money in your spouse or child’s name, so that any gains would be realized on their tax return. Attribution rules can also be triggered by making minor children shareholders of a business. The CRA takes the view that is must be reasonable for the taxpayer to have made the investment/purchase themselves. If an investment or purchase is made by the taxpayer in their spouse or childs name, any gains from that transaction must be reported on the taxpayers return, not that of the spouse or child.
Investing within your TFSA/RRSP
If you are investing withing your TFSA or RRSP there are some important things to keep in mind. The first is to pay close attention to your contribution limits. If you go over your yearly limit, the penalty is 1% of the excess amount per month, going back to when you went over your limit. There is also some seperate tax filing that will have to be done to get it straightened out, these returns start at $250 per year.
The other thing to pay attention to is the type of investment that you are holding within your RRSP or TFSA. Make sure that they are CRA qualified investments. If they are not, they will have to be treated as taxable income. Here is a link to the tax folio from CRA that discusses the types of qualified properties:
https://bit.ly/3Od46ni
On a side note, if you own foreign dividend paying investment within your TFSA, those dividends are taxable income in your hands, and must be reported.
Investment losses incurred within your TFSA & RRSP are not capital losses. Something else that many people do not understand is that if you realize a loss (sell the shares at a loss) within your TFSA or RRSP, you do not get that contribution room back. For example, if you had made an investment of $5000 in shares within your TFSA, and those shares dropped in value to $2000 when you sold them, and withdrew that cash from your TFSA – your withdrawl amount is $2,000. You would get the $2000 in contribution room back in 1 year, but the other $3000 is not counted as a withdrawl, and that contribution room is never recovered.
If you find yourself having frequent buying and/or selling transactions during the year, the CRA can rule that your trading is a business, and therefor subject to regular income tax (100% of gains taxable) rather than being capital in nature, and subject to capital gains tax (50% of gains taxed). Here is a list of behaviours that they look at when making this determination:
- Extensive buying and selling of investment properties, frequent transactions
- Owning the securities for short periods of time
- If the taxpayer has some knowledge of or experience in the securities market
- Part of the taxpayer’s ordinary business is trading in securities
- A substantial amount of the taxpayers’ time is spent investigating and studying the market for future security purchases
- Security purchases are financed primarily with debt or margin
- The taxpayer has made it known or advertised that they are willing to purchase securities
- Securities purchased are speculative in nature and do not pay dividends
The CRA is no longer mailing out cheques, please set up direct deposit and they strongly recommend that you also set up a personal my CRA account.
- February 29th RRSP deadline for 2023 tax year
- February 29th – WCB & Worksafe annual return filing deadline (please remember to send us your worksafe codes)
- March 30 – T3 trust filing deadline
- April 30th – personal tax filing for non self-employed persons
- April 30th – filing deadline for 2022 and 2023 UHT returns (we are not expecting any further extensions)
- April 30th – all personal tax owing is due and begins incurring interest after this date
- June 15th- self-employed persons tax filing deadline (taxes owing were due April 30)
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