Investment Q&A

Q: I am up 200% on TOU. With the potential of The liberal Gov’t changing the rules on capital gains, would I be wise to swap TOU for ARX for 30 days to trigger the capital gain and protect my win? I will switch back in December.

Q: My 28yr old son is looking to build a diversified ETF portfolio with 100% equity exposure with a bent towards growth given his long investment horizon.  These will be spread across his TFSA, RRSP and Non-Registered accounts.  Since he will be contributing smaller amounts on a regular basis a zero commission platform such as Wealthsimple is appealing.  However, they charge 1.5% fee for all currency conversions making it only practical to hold Canadian traded ETF's.  As a result he is considering the following:

ZSP 40%
XIC 25%
TEC 20%
VIU 10%
VEE 5%

ZSP + XIC + VIU + VEE together create a mix of ETFs that are globally diversified and very similar to the structure of XEQT/VEQT.  Versus XEQT/VEQT This portfolio has a slightly lower weighted-average MER at 0.16% and also has 20% in TEC (in place of something like QQQ) which is more growth oriented. Here are how the sectors would be weighted with this portfolio:

Info 31%
Financial 15%
Cons Disc 11%
Industrial 9%
Healthcare 8%
Communica 7%
Cons Staples 5%
Energy 5%
Materials 4%
Utilities 2%
Real Estate 2%

These would be the top 10 holdings with this portfolio and these top 10 would account for 24% of holdings in this portfolio:

AAPL5.1% MSFT4.9% AMZN3.2% GOOGL1.8% FB1.7% GOOG1.7% TSLA1.5% SHOP1.4% RY1.2% NVDA1.2%

If this was you at 28, can you please comment on
- are the 5 ETFs he has chosen ones you would go with given his objectives, if not, what changes/substitutes would you make along with recommended % allocations?
- is his % allocation across the 5 appropriate or would you make changes? For example I thought there might be too much overlap between ZSP and TEC as they are both highly invested in AAPL, MSFT, AMZ and FB and he is looking at 60% going into these 2 ETF's. That may well be what you want at his age but  I wonder if he is better served by reducing ZSP to 25% -30% and TEC to 15% and add  the remaining 15-20% to CDZ or VGG (or something else?)
- given he will be making contributions to his TFSA, RRSP and Non-registered, which ETF would be best in which account and why? 

Thanks for all your help, 
Scott

Q: I am a Canadian citizen who resides full-time in the U.S.
Just recently, my Canadian bank (CIBC) restricted my Canadian-domiciled RRSP to only sells, rendering it virtually useless.
I am under the impression trading a non-registered account is not illegal.
I understand this is not in your wheelhouse, but do you know of any financial institutions which allow foreign residents to trade their RRSPs?
You can post this on the public portion of the Q&A in the hopes it helps others in my situation.
Thanks, I really hope you can offer some assistance.

Q: Wondering how to lessen tax on dividend income in a cash account. I gather using a DRIP doesn't do anything in that regard?? If not then is there any holding, individual equity or ETF, that provides a utility, telecom or reit type of relative safety with dividend that somehow lessens the tax one would normally pay on dividend income. Thank you for your help. Ken

Q: With respect to Ben's question, as long as he keeps documentation of the January 2020 conversion price and his 2020 tax return he will not have to pay double tax on the CG when he does sell BYD. CRA will have that information in their files as well. As long as you have supporting documentation CRA will not double tax you. Ignore the T5008 if it shows ACB of $49. When you call CRA, you typically get the most junior clerk.

Q: Good day team,

Please excuse me if this question has been asked before but is there an international focused etf I can contribute to in my tfsa where I don't have to pay withholding taxes? If so, can you list a few please?

Cheers

Q: Hi 5i. I was wondering if you or other members can provide insight on the following tax issue.

I bought Boyd Group Income fund in 2015 ($49/share) in my BMO InvestorLine account. When it converted to a corporation on Jan 1, 2020, my understanding was that it triggered a capital gains event at the conversion price of $202 and that I would have to declare this gain and pay taxes on it in 2020 even if I did not actually sell any of my shares. So I did this, even though I retain all my shares to date.

My issue is that for the 2020 tax year, I did not receive any documentation of the conversion in any brokerage trading summary document or issued T5008 slips, and my investment account still shows the original Cost value of $49.

I called CRA as I was concerned that when I eventually sell the Boyd Group Services shares in the future, the T5008 slip would reflect the original cost value and CRA will claim I need to once again pay capital gains taxes based on the original $49 instead of $202/share.

What CRA told me basically confirmed what I was afraid of -- that is, their assessment will be based purely on information issued on the brokerage T5008 slips and that the cost value would most likely reflect the original $49 share price rather than $202. So I may either have to pay these capital gains taxes again when I do sell, or get reassessed and get a notice saying I owe the CRA additional taxes if I use $202 as the new cost base and deal with the consequences.

I’m wondering if you have any thoughts on this. Also, if any of your other members are in a similar situation, having already paid taxes on this conversion while still holding on to their original Boyd Group services shares and if so, what they did or intend to do.

Many thanks, Ben

Q: Hi team
I made a sizable gain of KL (non registered account) over the long term, now that there is a chance of merging with AEM
if I decided to let the stock of KL merge with AEM; do I have to pay capital gains?

as there is very little premium of AEM to take over the KL, is there a good chance
that the shareholders of KL would reject the take over? thanks
Michael

Q: Peak tax loss selling season. Is there such a time and if so when?

Q: BEP.UN (TSX) pays source dividends in US dollars I believe. If this stock is in a Canadian TFSA, is it subject to US with holding tax.
Thank you

Q: Regarding Robert's question this morning about withholding taxes on foreign dividends:
It is my understanding that there are no withholding taxes on the dividends of companies headquartered in the U.K.
I have never had taxes withheld on my U.K. holdings (BTI, BP, AZN). RIO plc is also headquartered in the U.K.

This is a very informative website:
www.dividend.com/dividend-education/everything-investors-need-to-know-about-foreign-dividend-stocks/

Q: Hello. As a Canadian resident, how are the dividends from these companies handled in respect of any hold back and taxes? They would be held in a non registered account.

Q: Can losses on us equities be claimed as losses on my Canadian income taxes?

Q: Hi 5i,
If a Canadian stock trades on a US Exchange, are the dividends paid out in US$? If so are there any withholding taxes.
Thanks for all the great work. Ivan

Q: Would appreciate your thoughts on what types or specific investments to hold in the three kinds of accounts: investment, tax free savings and registered retirement savings.
Would the selection of investments change based on age or time perspective (long range vs. short range) ?
This could involve dividend rate, growth, taxation issues, demographic and technology changes, climate perspectives, ESG considerations or other factors.
Thank you for your investing insights.

Q: Are there any tax disadvantages to adding XSP or ZSP to a non-registered account?

Q: Hi

Can I sell AEM for tax loss in my cash account and buy XMA on the same day?

It is noted that AEM is 4.74%.of XMA.

Would this allow me the tax loss?

Any other suggestions you have are most welcome.

Thank you

Mike

Q: I am trying to understand the impact of a 75% Capital Gains inclusion rate. Today with a 50% inclusion rate, assuming a 50% personal tax rate, you keep 75% of any taxable gain. With a 75% inclusion rate you would keep 62.5%, or 16.7% less. Is my math correct?

In a 75% inclusion rate, can 75% of the loss be used against gains? ie. a $100 gain would be offset by $100 loss meaning no tax would be due just as it is today?

If this is true, you may be best to lock in gains and save 16.7% if its a holding you plan on selling in the next year or two anyways. You can always buy it back immediately after locking in the gain. 16,7% seems significant

On the LOSS side, it seems more black and white. Today you can claim 50% of the loss and if there is a change to 75% inclusion rate, you can claim 75% of the loss next year. If there is no change to the inclusion rate a 50% loss claimed this year or next year is marginally better to claim now but if the inclusion rate changes from 50% to 75% it will be worth 50% more next year. It seems to me you are better off waiting until next year to claim any losses.

Is this a valid analysis or am I missing something.

Many Thanks
Scott

Q: Just to be clear. If I journal a company from my CDN to US account, then the dividends are still subject to the Canadian dividend tax credit, even though they are paid in US funds.

The internet says: "
Since U.S. dividends are not paid from Canadian corporations, U.S. dividends do not qualify for the preferential Canadian dividend tax treatment. Foreign dividends, including U.S. dividends, are subject to tax at your marginal tax rate like interest income."

Q: Hi 5i Team - I have shares of ECN in both my non-registered and TFSA accounts. Could you tell me if the special dividend of $7.50 will be treated by Revenue Canada as a regular dividend by a Canadian corporation. If so then there will be a percentage added to the amount of dividend for total income purposes which could affect my marginal tax rate. Is it better then to move the non-registered shares into my TFSA (in spite of the dividend tax credit) which will trigger a capital gains of 50% of the profit. Thanks as always for the great service!