Investment Q&A

Q: I have a capital gain this year from PHO. I have never realized a capital loss in my lifetime. If I sell a losing position next year before my taxes are due (before April 30th) am I allowed to use that 2022 loss and apply it against my 2021 gain? Or do I need to sell a losing position in 2021 to apply it to the gain in 2021?

To pay no capital gains tax on PHO, do I need to sell a stock that has a loss amount EQUAL to the gain amount of PHO?

Thank you

Q: For discussion purposes, If one has taxable income of >$220K in Ontario, the tax rate on income would be 53.53% and 26.77% on capital gains (for now!).

My first question is if one trades too frequently in a TFSA and the CRA decrees that this is business income, then is it correct to assume that the gains are taxed at 53.33% i.e., go from 0% tax to 53.53% tax?

My second question. If one trades too frequently in an unregistered cash account, is that also treated as a business and taxed at 53.33% i.e., go from 26.77% tax to 53.54% tax?

Any thoughts on roughly how much “too frequent” is?
Thanks so much.

Q: Hello team,

I have to crystalize some losses to offset gains. I have a substantial position in ABCL (-56%) and BHC (-78%) and can sell either completely and be done with offsetting the gains. Do you suggest I do that or should I get rid of SDGR (-23%), BMBL (-38%) and PENN (-23%) as well ,if ABCL is worth holding onto, at least partially?

I know other than BHC, they all do have a good bounce potential after the tax-loss season is over. However, I also know that something like BMBL or even ABCL may be broken stories and may take a very long time to recover.

I appreciate it if you can share in which order you would sell and why (if you could kindly include the main reason for each).

Best!

Q: For example, I have 200 TD shares at a cost of $50 EA in my cash account with Questrade. I have built this up over the last few years. I have NOT done anything at Tax Time, re: Div Tax Credit, Gross Up, etc. Should I be doing something? Each year I simply filed my Tax return based on what Questrade sent to me & the CRA.

Thank you!

Q: I appreciate your in-depth reviews of many Canadian Dividend companies. Is it possible to include in your reports what form those dividends are distributed in? For instance the dividend from AW is considered non-eligible and the dividend for BCE is considered eligible. What are the advantages of each type. It would be helpful for me when deciding which account to purchase the equity in. Do you have a recommended site or source for more information.Thanks for you service.
Jim

Q: I think Brookfield Asset Management is a great company to invest in for the long term. I'm debating whether to acquire more BAM in CDN or USD but wanting to better understand the USD option. Can you help me understand the pros and cons of holding BAM:US in a USD TFSA vs. a USD RSP vs. a USD non-registered account? Thanks very much, your answers are always really helpful.

Q: You are probably going to be bombarded with questions re ECN in the next few days. Here is mine. According to the information circular , of the $7.50 payout, $4.15 is a return of capital and $3.35 a special dividend. In my non-registered account, if I paid $3.00 per share does that translate that my cost per share is zero?
Thanks

Q: I am looking to offset some capital gains received this year from PEO and PHO (thanks!). Currently I have the following holdings in a loss position, in order of dollars down: TDOC, TV, XBC, HAL, XEG, NFI, SQ, TECK.B, XTC, WELL, ENGH, PLTR. I would need to sell the first six to fully offset the gain, or could sell more if using those in a smaller loss position. How would you rank these holdings in order of selling, and which of these would you look to buy back after 30 days (if any)? Note that these are held within a broad portfolio that I am also looking to consolidate.

Q: I have done some calculations for me re selling or holding ECN that others may be interested in doing. My ACB for ECN is $3.75/sh and a sale at $11 would result in a $7.25 capital gain/$3.63 taxable and about $1.81/share taxes to be paid.
If I hold, the $7.50 dividend would result in my ACB going to zero (3.75-4.15) and a $0.40 capital gain and a 0.10/share tax liability plus the $3.35 special dividend would likely require about 32% tax payable (AB) or $1.07. So total tax payable by keeping the shares for me is about $1.17/share. Since I want to own the ECN shares after this, it is cheaper for me to hold the shares than to sell and rebuy. Interesting to me that my ACB will be zero after this. I hope this helps others do the math.

Q: Hi Peter & 5i,

Just a comment. I always find your answers to ROC (Return of Capital) perplexing to me. 5i seems to view ROC as almost a completely negative situation and that you are almost always receiving your own money back. That is just not the case. Today's response to a question from Albert regarding the ROC with regards to CAR.UN and REIT'S highlighted this situation even more. I like a stock (CAR.UN) that has went from $30 in 2016 and is $60 in 2021 and that 63.8% of the distribution during those 5 years has been ROC. Multiple great things to like in a non-registered account from a total return basis and a tax scenario.

The technical details for ROC and REIT's can be highlighted in this response from John Heinzl of the Globe and Mail. It is one of the best answers that I've seen.

Please post as Public if you think it can help with the ROC understanding.

This is the question posed to John Heinzl - I have a question about calculating the yields of real estate investment trusts. Many REITs distribute significant amounts of return of capital. It has never made sense to me to include getting my own money back when calculating my yield. Do posted yields need to be adjusted by deducting the ROC to get a more realistic idea of what one is receiving?

Answer - Return of capital doesn’t necessarily mean you are “getting your own money back.” In general, ROC is defined as the portion of a distribution that does not consist of dividends, interest, realized capital gains or other income. In some cases – for example, a high-yielding mutual fund that distributes so much ROC that its net asset value erodes over time – you are indeed getting paid with a portion of your original capital.

But with REITs, it’s not that simple. ROC typically arises when a REIT’s distributions exceed its taxable income. This isn’t necessarily a problem, however, because income is affected by accounting items, such as depreciation, that don’t reduce cash available for distributions. In other words, when you receive ROC, you are getting cash generated by the business, not some sleight-of-hand trick by the REIT.

For investors, ROC has one big advantage: It is not taxed immediately. Rather, ROC is subtracted from the investor’s adjusted cost base, which gives rise to a larger capital gain – or smaller capital loss – when the units are eventually sold. For REITs that distribute large amounts of ROC, it can significantly reduce the tax burden in non-registered accounts.

Interested in a particular REIT? Most REIT websites provide a detailed annual breakdown of the tax characteristics of their distributions. In addition to distributing ROC, REITs typically pay out capital gains (50 per cent of which is taxable), other income (which is fully taxable) and in some cases, dividends (which benefit from the dividend tax credit).

One final note: When assessing their operating performance, many REITs focus on real estate cash-flow measures, such as funds from operations (FFO) and the more stringent adjusted funds from operations (AFFO). These measures are also useful for determining a REIT’s payout ratio and assessing the sustainability of its distributions.

Q: Why was CARs distribution in 2020 56% ROC? Is this related to their tax status?

Q: It's almost mid November, is it possible to name some stocks that will probably have some tax loss selling and because of this may become attractive at the lower price?

thanks,

Paul

Q: I would like to purchase about 5 ETF’s
Is there any advantage/ disadvantage to waiting till Jan 2022 as opposed to buying in 2021?
I know some mutual funds do a year end distribution which add income whic needs to be accounted for in current year’s taxes - I would like to avoid this
Do ETF’s have year end distributions ?
Thanks as always for your assistance

Q: Would you endorse selling AT and buy it back in 30 days?

Thanks for your service?

Q: "We are not tax experts, but it is generally wise for dual citizens to avoid TFSAs" This was your response to an Oct 25 question. I have been contributing to a TFSA since they started in 2009 with limits soon to exceed $80,000. There is some paperwork required as the Americans consider TFSAs a 'foreign trust' rather than a self funded, self directed investment vehicle. The paperwork time is worth the investment advantage. Some general guidance from US tax accountants would be beneficial to your subscribers with dual citizenship and those filing US tax forms. I use RLB with offices in KW/Guelph (Jeff Hood is the US tax person)

Q: Hello 5i,
I’m helping a conservative investor with a tfsa. Vbal makes up half of the account.
In trying to boost monthly income I’ve come up with the above etfs.
Based on 2020 distributions,how would each of the above etfs be taxed if held in a tfsa?
Also, can you please verify the sector exposure of zup (similar to pff - usd) I thought the financial % was underweight.

Q: On Nov. 2 you answered Scott's question about U.S. estate taxes, saying that "Canadian stocks that are interlisted on other exchanges do not get captured in U.S. estate taxes". What about ADRs that trade on U.S. exchanges?

Q: I was disturbed by a recent question about US estate tax and the fact that a Canadian Citizen residing in Canada is still subject to US Estate taxes if they hold US properties or US stocks or ETF's upon their death. I hold many US stocks. I also hold Canadian stocks on the US side of my brokerage account (ie AQN, BAM.A, MX, OTC etc_ in order to collect the dividends in US dollars. Are these Canadian equities being held in US dollars considered to be US investments when calculating US Estate Tax? I also hold a considerable amount of US dollars in the these accounts, is US currency considered to be US property as well?

Q: Re Comments from Richard on Oct27 about proceeds of WPT buyout. From what I read the special dividend is meant for US/foreign holders not canadians. I expected capital gain only. Could you clarify? Thanks.

Q: Hi 5i,
I'm not sure this is an appropriate question to ask but, here goes.
I was considering purchasing AMT for my TFSA and NonReg accounts.
Can you help explain the taxation issues I need to be aware of for each account. (capital gains and losses, distributions, dividends etc.
I understand that the taxation issues for a US REIT may be different from a US stock.
Thanks