On Sat, 16 Nov 2019 03:42:29 -0500, Clare Snyder
wrote:

On Sat, 16 Nov 2019 01:47:32 -0500, wrote:

On Fri, 15 Nov 2019 22:18:11 -0500, Clare Snyder
wrote:

On Fri, 15 Nov 2019 01:31:50 -0500, wrote:

On Fri, 15 Nov 2019 01:12:25 -0500, Clare Snyder
wrote:

On Thu, 14 Nov 2019 21:46:27 -0500, wrote:

On Thu, 14 Nov 2019 23:00:14 GMT, (Scott Lurndal)
wrote:

writes:
On Thu, 14 Nov 2019 04:57:16 -0800 (PST), trader_4
wrote:



You do have to take into account the market had just crashed and a
good percentage of that gain was just getting back to normal. Keeping
a rally going is as hard as watching the recovery from a crash.

I guarantee you there will be a big crash if they do succeed in
removing Trump

Yeah, right. Removing trump will fire up the market assuming his
successor manages to convince the rest of the world that trump
was an abberation instead of a new normal (but we're
still screwed in the long run due to the trump tax cuts and
insane annual budget deficits).

If you get democrats with the Sanders Warren tilt to their politics
they will target corporations with excessive regulations and taxes,
remove tax incentives to invest and generally scare investors enough
to make 1929 or 2009 look like a minor correction in the market.


Canada is doing just fine and I doubt even Sanders would tax
corporations enough to make life more difficult for corporations than
it is in Canada - which is NOT terribly onerous.

The one that gets lost in the noise is Sanders/Warren and others going
after the capital gains deductions. Without them, a good part of the
reason to invest in equities goes away.
Long term deductions tend to incentivize leaving your money in an
investment for a while instead of day trading and adds some stability
to the market. .
We have Capital Gains tax in Canada - with a reasonable lifetime
exemption and Canadian investors still invest pretty aggressively in
equities. Business startups are thriving.

I suppose the question I don't have the answer to is whether Canada
gives tax preference to long term capital gains over ordinary income.

Yes last I remember about half
If so, that is all we are talking about. Could we look at those rules?
Sure. I am not sure 1 year is "long term" and I am not sure the profit
on homes should be sheltered (zero up to a half million or something)
but it is what it is.

Principal residence is sheilded to 250,000 for a single personand
500,000 for a couple. - and total capital gains lifetime to 866,912 is
exempt. On income or rental property you can "1031" it into another
income property within 180 days without paying capital gains on it -
which means you can "defer" the tax.
A primary residence must have been lived in for 2 of the last 5 years
to qualify.

Also
The capital gains exemption (CGE) is available to individuals only,
not corporations, and forms a deduction (worth 50% of the exemption,
since 50% of capital gains are taxed) from net income. Benefits that
use net income, such as the age credit and OAS clawback, will be
calculated before the deduction is reflected.

To qualify for the exemption, three tests must be met at the time of
disposition.
€¢Small business corporation (SBC) test: All, or substantially all, of
the companys assets must be used in an active business carried on
primarily in Canada. €œAll or substantially all€� is generally
considered to mean at least 90%, using fair market value. Only the
companys assets are considered in the criteria; debt and other
liabilities have no impact. Assets not listed on the balance sheet are
also included, such as goodwill and internally generated patents. The
reference to €œprimarily in Canada€� generally means at least 50%.
€¢Holding period test: The disposed share must have been owned by the
shareholder or a related person throughout the 24-month period prior
to the disposition. This is an attempt to limit the CGE to longer-term
investments rather than rewarding quick flips.
€¢Basic asset test: Throughout the 24 months prior to the disposition,
the corporation had to have been a Canadian-controlled private
corporation and more than 50% of the companys assets had to have been
used in an active business carried on primarily in Canada.

A series of tactics are commonly used to help qualify for or optimize
CGE.

Purify

When assets do not meet the 90% percent threshold for the SBC test,
shareholders can attempt to purify their assets€”i.e., employ them in
earning active business income. To adjust the mix of active and
passive assets, a company could use passive assets to pay down
liabilities, buy active business assets or pay a dividend to the
shareholder. By recharacterizing or removing passive assets, the mix
of assets is re-proportioned to meet the 90/10 ratio of active to
passive.

Crystallize

Crystallization refers to claiming the CGE on qualifying shares that
the shareholder continues to own. When CGE is crystallized, the CGE
claimed is embedded in the adjusted cost base (ACB) of the shares held
by the shareholder, increasing the ACB by the amount of the CGE
claimed.




Say, for instance, a shareholder has $800,000 in CGE left and her
shares have an ACB of $1,000 and a fair market value of $850,000. If
she crystallizes her CGE, the ACB of the shares will increase to
$801,000 instead of $1,000.

The CGE claim cannot be immediately converted to cash without
triggering negative tax consequences. By embedding the amount claimed
in the ACB, it reduces the capital gain when the shareholder
eventually sells the shares. Crystallizing ensures a shareholder
benefits from this tax advantage without having to meet qualifying
criteria at the time of sale.

Multiply

Multiplication involves using the available CGE of other family
members. If several family members can claim their CGE at the time a
business is sold, the overall income tax liability can be reduced
across the family unit.

Pitfalls to watch for

When using these planning strategies, watch for anti-avoidance
measures and other tax implications, such as the following, to
minimize any unanticipated consequences.
€¢As mentioned, Section 84.1 of the Income Tax Act blocks shareholders
from using crystallization strategies to convert CGE into cash.
€¢The alternative minimum tax (AMT) can cause an unexpected tax
liability in the year CGE is claimed. Generally, this can occur when a
taxpayer crystallizes in a year of otherwise low income. While AMT is
refundable, a refund is generated only when AMT is less than* the
regular tax calculation in the subsequent seven years.
€¢A balance in a taxpayers cumulative net investment loss (CNIL)
account can restrict access to the CGE. As the name implies, this is a
cumulative calculation that considers all of an individuals
investment income and investment expenses incurred after 1987. If the
calculation results in a net loss, the CNIL could impact a CGE claim.
€¢An allowable business investment loss (ABIL) could impact a CGE
claim. If an ABIL is realized in the year, whether or not it is
claimed on the tax return, it is used in the CGE calculation.
€¢The CGE could be denied if it is reasonable to conclude that a
significant portion of the capital gain realized on the disposition of
the shares is attributable to a lack of dividends having been paid on
the shares.
€¢The capital gain from a disposition and capital gain deduction must
be reported and claimed in the year of disposition. Failure to include
the deduction in the return cannot be corrected later.
€¢If the capital gain is realized in a trust and the trust allocates
the capital gain among several family members, these amounts are
payable to the family members. Using a family members CGE entitles
that person to a payment.

I imagine the end result is about like the US but it seems more
complicated. Unusual for a place where the normal tax return seems to
be a one or 2 page document that should take 10-15 minutes to fill
out.
It takes me a couple hours and I have a pretty simple return. The
problem is the convoluted "work sheets" you need to run through to do
things like take 85% of your SS payments or figure out if your
dividends are taxable.