Quote:
Originally Posted by The Fonz
Question: Let's say I take $500, and spend it all on a stock worth $5.
500/5 = 100
Then I sell at $7.50...
100 x 7.50 = $750
What sort of fees/taxes will I be paying on this?
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First, you will pay transaction fees when you buy and sell, this varies from broker to broker.
Second, you will pay capital gains tax on 50% of what you made ->
750 - 500 = 250
250 * 50% = 125
Tax = 125 * Individual Tax Rate
Capital gains are taxed at your individual tax rate. I am not sure where you are, so I can't say.
If you hold this stock inside of a registered retirement savings plan account, or a tax free savings account (to come into effect Jan 1 2009), then the capital gains tax will not be paid. However, you do pay tax when you start to pull funds out of that RRSP, and you are forced to withdraw the funds once you hit a certain age.