Capital Gains Tax

[Sylvanfan]

Originally Posted by STAMPEDRED

You sound a little bitter there Sylvanfan... was that you??

(if so, you're not gonna audit me are ya?? )

I was audited in 2006 over my moving expenses that I claimed. In the end they found out that I owed them $35. Still they wanted that $35 really badly after I'd paid like 10 grand in moving expenses. There were a lot of other petty technicalities that they got me on to determine that I owed them that $35. If I was as petty as them I probably could have got the receipts they declined rectified to save my $35. But in my world it's not worth spending 10 hours to save $35. In revenue Canada's....it absolutely is.

[Bobblehead]

Some auditors are jerks, others are fine. It is the luck of the draw as to which one you get. Same with phone support. I used to need to call in a few times a day to take care of various client matters. Depending upon who answered the phone I knew what type of service I would get. With the crappy people I would ask one easy question ("Can you tell me what you have on file for last year's capital loss?") then hang up and call back hoping to get some one different. With the good ones I could ask a number of questions and get a lot of stuff taken care of over the phone.

And there is nothing "wrong" with transferring property in a "non-arms-length" transaction. You just need to declare the gains properly and that can be tricky as hell. If you do it wrong, you will get interest. If you don't even try to do it right you will probably get penalties. If you do it wrong and CRA thinks you did it wrong on purpose, then you are talking big money and possible jail.

Don't take everything CRA does as being gospel. They are human and make mistakes. If you disagree, call them and ask questions.

Tax avoidance and tax evasion are very different things.

[cSpooge]

Originally Posted by Sylvanfan

I was audited in 2006 over my moving expenses that I claimed. In the end they found out that I owed them $35. Still they wanted that $35 really badly after I'd paid like 10 grand in moving expenses. There were a lot of other petty technicalities that they got me on to determine that I owed them that $35. If I was as petty as them I probably could have got the receipts they declined rectified to save my $35. But in my world it's not worth spending 10 hours to save $35. In revenue Canada's....it absolutely is.

you weren't audited at all... You were selected by the computer for post assessment review. Theres a big difference.

[Sylvanfan]

Originally Posted by cSpooge

you weren't audited at all... You were selected by the computer for post assessment review. Theres a big difference.

Yeah, probably. Either way I don't care. Lesson is pay your taxes because if you don't...they'll find a way to make you. Even when you do...they'll probably come after you for more. They just can't get enough.

[Locke]

Originally Posted by Bobblehead

Some auditors are jerks, others are fine. It is the luck of the draw as to which one you get. Same with phone support. I used to need to call in a few times a day to take care of various client matters. Depending upon who answered the phone I knew what type of service I would get. With the crappy people I would ask one easy question ("Can you tell me what you have on file for last year's capital loss?") then hang up and call back hoping to get some one different. With the good ones I could ask a number of questions and get a lot of stuff taken care of over the phone.

And there is nothing "wrong" with transferring property in a "non-arms-length" transaction. You just need to declare the gains properly and that can be tricky as hell. If you do it wrong, you will get interest. If you don't even try to do it right you will probably get penalties. If you do it wrong and CRA thinks you did it wrong on purpose, then you are talking big money and possible jail.

Don't take everything CRA does as being gospel. They are human and make mistakes. If you disagree, call them and ask questions.

Tax avoidance and tax evasion are very different things.

Extremely well said!

That pretty much sums up the way I do things too, although I take a somewhat more conservative approach to the Non-Arms length transactions. In my experience, the CRA almost always defers to evasion rather than avoidance in Non-Arms Length cases. Its pretty much a guilty until proven innocent system.

Furthermore, I have seen too many people try it for extremely dubious reasons and get nailed, so there exists a point and counterpoint in this area of tax.

[Neeper]

Originally Posted by Mccree

But you made the money why are you screwed. Good on you for making a profit and paying some tax. It is better then losing and paying nothing.

I am screwed because I re-invested 80% off it already.

[Neeper]

Originally Posted by Tron_fdc

It's actually a max of 39% on 50% of the taxable capital gains, if that helps ease the pain....

So say, someone makes $500,000 on their investment. They get taxed 39% on $250,000?

[albertGQ]

Originally Posted by Neeper

So say, someone makes $500,000 on their investment. They get taxed 39% on $250,000?

If you're in the highest tax bracket living in Alberta, than yes

[Incinerator]

Originally Posted by Neeper

I am screwed because I re-invested 80% off it already.

the Canadian Real Estate Association has been lobbying hard for investors in situations like yours, if successful the tax can be deferred until you "cash out for real" (like an RRSP), if you keep pouring it back into real property investments you will not have to pay tax until you're done.

[Clarkey]

Originally Posted by Neeper

So say, someone makes $500,000 on their investment. They get taxed 39% on $250,000?

If that is your tax bracket.

[Tron_fdc]

2007 tax brackets:

http://www.cra-arc.gc.ca/tax/individ...axrates-e.html

[Mccree]

Originally Posted by Incinerator

the Canadian Real Estate Association has been lobbying hard for investors in situations like yours, if successful the tax can be deferred until you "cash out for real" (like an RRSP), if you keep pouring it back into real property investments you will not have to pay tax until you're done.

They are also pushing for that for stocks too. Once you get the cash you pay tax. I suspect it will come after the next election. It was mentioned in the budget a few year ago.

[cSpooge]

Originally Posted by albertGQ

If you're in the highest tax bracket living in Alberta, than yes

he would be automatically in the highest tax bracket based of the $250000 gain.

[Clarkey]

Originally Posted by Mccree

They are also pushing for that for stocks too. Once you get the cash you pay tax. I suspect it will come after the next election. It was mentioned in the budget a few year ago.

I really hope they do this. Income splitting would be another good one.

[corporatejay]

just so people do know.

it's not 39% on the whole thing.

it's 25.5% on the first, then X on the second and so on. 39% is a good quick estimate but that isn't the true amount you are being taxed.

[albertGQ]

Originally Posted by cSpooge

he would be automatically in the highest tax bracket based of the $250000 gain.

well, if he only makes $20,000 a year at his other job, than not the entire $250,000 gain is taxed at 39%. The tax brackets are tiered

[MoneyGuy]

Here are the federal backets for 2007. Alberta has a 10% flat tax so add 10% to these rates.

BTW, some of you need to know that paying high taxes is a good thing in the sense that it's a price of your success. I have some clients who pay more in taxes than some people earn. Which would you prefer to be, the guy who makes 150K and pays 35-40K in taxes (just guessing, I didn't bother to do the calculation) or the guy who earns 40K and pays little in taxes? I know who I'd rather be.

• 15.5% on the first $37,178 of taxable income, +
• 22% on the next $37,179 of taxable income (on the portion of taxable income between $37,178 and $74,357), +
• 26% on the next $46,530 of taxable income (on the portion of taxable income between $74,357 and $120,887), +
• 29% of taxable income over $120,887.

[albertGQ]

Originally Posted by MoneyGuy

Here are the federal backets for 2007. Alberta has a 10% flat tax so add 10% to these rates.

BTW, some of you need to know that paying high taxes is a good thing in the sense that it's a price of your success. I have some clients who pay more in taxes than some people earn. Which would you prefer to be, the guy who makes 150K and pays 35-40K in taxes (just guessing, I didn't bother to do the calculation) or the guy who earns 40K and pays little in taxes? I know who I'd rather be.

• 15.5% on the first $37,178 of taxable income, +
• 22% on the next $37,179 of taxable income (on the portion of taxable income between $37,178 and $74,357), +
• 26% on the next $46,530 of taxable income (on the portion of taxable income between $74,357 and $120,887), +
• 29% of taxable income over $120,887.

don't forget to mention the exemption amount, where in my opinion, is way too low

[STAMPEDRED]

Originally Posted by Neeper

I am screwed because I re-invested 80% off it already.

I would say your smart, not screwed. There is no point leaving the money in the bank to pay your taxes later cause the banks are so generous and will give you a dollar per month even for letting them invest your money elsewere and make a boatload off of it.

You also have time to find ways to pay your taxes off. Once you start earning more, you pay quarterly instead of yearly which is great because its not all at once and gives you more time to make more off your dollars earmarked for the government before they get it!

[Locke]

Originally Posted by fotze

Can Neeper somehow put the house under his spouses income if she does not make more money?

Non Arms Length Rules would apply as would the stipulations and restrictions on income splitting.