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Originally Posted by Table 5
A question for the accountants in regards to the impending raise of the capital gains tax (thanks again Justin!).
So I have an investment account under my corporation. These are mostly long-term holds, but with a currently decent profit on paper. Am I correct to assume that if I sell the winners before June, the capital gains will still only be taxed at the current 50% rate? My thinking is that I can sell the stocks now to lock in that tax rate, and then buy them up again.
Anything off with that line of thinking? I know I'll have to pay more taxes for the year, but would rather pay 50% now then 65% later.
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I don't see an issue with how you derived your logic. But the true answer is, no idea and individuals must decide for themselves what they want to do. Everyone doing this is basically going for a buzzer beater. Consider that for something like this, the CRA is basically going to do everything they can do to call the goal back on video review.
In a theoretical scenario with these details provided, based on how CRA has historically investigated certain transactions, I think there is an exceptionally elevated risk that CRA could potentially investigate, attack and latch onto a individual/entity for the transactions and claim an avoidance rule standpoint.
Canadian income tax rules use laws that are written in a way that is fundamentally principles based. If the intention of an individual was to hold long and was not to sell prior to the announcement, a sudden change due to the announcement might cause the CRA to evaluate the individual's actions as a "potential bad actor" in CRA's eyes. This especially if an individual were to re-purchase the same or exceptionally similar investments. The reasoning would be that the intention of such transactions were always for the purposes of avoidance.
Keep in mind that there's always an element of truth in a joke, especially if the joke is that in CRA's eyes, they often consider someone guilty until proven innocent.
It's not guaranteed that that CRA would be successful if they were to challenge transactions that are similar. However, it certainly already feels like low hanging fruit for the CRA if they could just tell Mr CRA Computer to automatically flag and investigate any capital gains transactions over a certain threshold that were transacted between April-June 2024. There's no way to know whether such a challenge from the CRA would even stick, if the CRA investigated similar types of transactions in detail.
The concept of a superficial gain doesn't exist. But for a sort of easier exercise, I'd view these proposed transactions from a similar lens and logic of the superficial loss rules. Replace the words loss in the rule with gains and see if it sounds like it's sounds like a transaction that might be undertaken. If the intention and logic of why someone is doing what they're doing is remotely similar to the fundamentals of superficial loss, especially if someone sorta implies they might be re-acquiring the same investments, I think such transactions might be of special interest to the CRA. I also believe that the CRA isn't stupid. Even if someone acquires an investment that is different in name, but exceptionally similar to the original investment, this won't cause the CRA to rule out these transactions as being the type that may be for avoidance purposes.
Don't try and score a goal if you aren't comfortable with the concept of a video review with the CRA. For those willing to accept the challenge and get the best chance at shooting their shot while also risking a bull#### delay of game/unsportsmanlike penalty, I do earnestly wish them the best of luck and I do hope they succeed.
Shooting a shot or not, both are valid. I'm just saying this is probably more like playoff hockey than regular season until the effective date passes. CRA likely will be reviewing every goal that is scored with extra scrutiny.