Capital Gains Question

[Azure]

Originally Posted by Shazam

Damn, I was hoping for something more angry.

Ask me about corporate taxes. That ought to get me worked up.

[Shazam]

Originally Posted by Slava

How do you figure they are taxed doubly right now?

Er, because they are?

[Shazam]

Originally Posted by Azure

Ask me about corporate taxes. That ought to get me worked up.

Although I'd love to see corporate taxes killed, the fact is as a small business owner, I just try and expense everything I can.

Last fiscal year was irksome because we made a rather large profit, so we took out bonuses.

[Azure]

Originally Posted by Shazam

Although I'd love to see corporate taxes killed, the fact is as a small business owner, I just try and expense everything I can.

Last fiscal year was irksome because we made a rather large profit, so we took out bonuses.

True.

I don't think I want them killed outright. For small businesses they should be next to nothing, and for a big company like Telus or Suncor they should be lower than any bracket in the world.

We can afford to do it anyways considering how much money we're making from royalties.

[Shazam]

Alberta has incredibly low small business tax rates, and a rather large tax credit to boot.

There are some economists that believe that high corporate taxes increases capital investment.

[Azure]

Really, really, really, really, really low isn't good enough.

How would a high corporate tax increase capital investment? By getting companies to cut back on their profits? Same gross income, smaller profit because they're spending more?

[Shazam]

Pretty much, yeah. I'm just reiterating a hypothesis. I really have no idea and haven't put much thought into myself as to whether or not it's true. I don't really have an opinion on it, either.

[Azure]

The obvious problem with that is that it doesn't really encourage companies to come here.

Especially oil companies that can basically have their headquarters anywhere in the world. If Dubai has lower tax rates they'll go there.

But if we're extremely competitive, they might just come here. Canada already has the added benefit of not being susceptible to an economy that can fall apart like Dubai or any other Middle East country.

[Shazam]

Personally, I don't think tax rates really have much effect. HQ location is only partially important; it's so easy to set up subsidiaries, and really, only publicly traded companies that are on exchanges have the extreme pressure to have profits. The rest of us suck the companies dry. Fark "profits".

[cal_guy]

Originally Posted by Azure

Tough call. I think its stupid that the money is technically being taxed twice, but on the other hand I like the fact that it can encourage the company to invest that money into other projects instead of paying it out to the shareholders.

But that is just me being an evil capitalist that wants companies to invest their money into building the economy.

On the other hand the shareholders deserve to make money too.

Is there double taxation of dividends in Canada? I know the US has it.

Canada grosses up dividends to 125% (to approximate the corporation's pretax income) which goes in as taxable income on the personal tax return. Then a dividend tax credit is given to reduce taxes payable (which approximate's the corporate taxes paid/may have paid). This only applies to corporations that are resident in Canada.

[red sky]

Originally Posted by MoneyGuy

Sure it does if you do the math. I gave you the basic info.

Okay so just do the average cost over the year, i.e. average price per share of a,b, and d?

[FurnaceFace]

Originally Posted by red sky

How would I be taxed on the following situation.

If bought a stock in 2008, say 5,000 shares at $1.20 = $6,000

Then in 2009 bought another 3,000 at $0.80 = $2,400

If I then sold 3,000 at $1.00 in 2009 for proceeds = $3,000

So would I have a capital gain of $600 or a capital loss of $600 or do I do a weighted average and have no capital gains or loss?

Thanks!

$6000+$2400=$8400 total cost

$8400/8000 shares = $1.05/share average

3000 shares x 1.05 = $3150

Sold 3000 shares for $3000

capital loss of $150

No?

[sixpacked]

Originally Posted by FurnaceFace

$6000+$2400=$8400 total cost

$8400/8000 shares = $1.05/share average

3000 shares x 1.05 = $3150

Sold 3000 shares for $3000

capital loss of $150

No?

Yup.

[jkstuart12]

Also, I believe capital gains are only 50% taxable and capital losses are 50% allowable.

[Slava]

Originally Posted by Shazam

Er, because they are?

The dividend tax credit is in place to stop this from happening though...in other words the corporation pays tax and then your taxes as the reciepient of the dividend income are reduced (in effect) to accommodate that fact.

[Slava]

Originally Posted by jkstuart12

Also, I believe capital gains are only 50% taxable and capital losses are 50% allowable.

Well capital losses can only be used to off-set capital gains...so I suppose that is basically saying the same thing, but a little different.

[DuffMan]

If you have stocks in a company that went bankrupt, can you use that as a capital loss?

[Azure]

Originally Posted by Slava

The dividend tax credit is in place to stop this from happening though...in other words the corporation pays tax and then your taxes as the reciepient of the dividend income are reduced (in effect) to accommodate that fact.

Like it was mentioned above, I think this only happens in Canada.

I'm not sure if the tax credit fully covers everything though.

[Slava]

Originally Posted by DuffMan

If you have stocks in a company that went bankrupt, can you use that as a capital loss?

Yes, unless its within an registered plan or TFSA (in other words if you would've had to pay tax on gains received). You have to be able to document the loss. (Bear in mind that I'm not an accountant)

[Locke]

Originally Posted by DuffMan

If you have stocks in a company that went bankrupt, can you use that as a capital loss?

Originally Posted by Slava

Yes, unless its within an registered plan or TFSA (in other words if you would've had to pay tax on gains received). You have to be able to document the loss. (Bear in mind that I'm not an accountant)

Pretty much bang on. Yes you can use bankrupt shares as a capital loss, BUT the company has to be gone. They cant be still listed and trading their shares for like $0.0000001 Cents or some crap like that and you should have it documented, but its usually pretty obvious.

My bill is in the mail...