avoiding capital gains in Canada
Hello,
May I ask you a quick question ? I bought A limited Partnership Land Investment through Walton International around 4 years ago for around 30,000,it is now ready to be cashed in at around 50,000 for a 20,000 profit.I paid it outright when I bought it and was wondering if there is anything I can do to avoid paying tax on it or atleast limiting the amount I pay.
Thanks for your time,
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david ingram replies:
The capital gain may be more than you think if you have received any income in the interim. You have to look at the T5013 or T3 or other information slips you have received to see if there has been a Box 42 or other notation amount showing 'return of Capital'. If so, the 'return of capital amounts' have to be deducted from the $30,000 you paid, an action which increases your Capital gain.
After that, one-half of the capital gain is taxable on line 127 of your return.
A simple way of avoiding the capital gains tax on that amount (one-half) would be to buy an RRSP for that amount if you have RRSP room left. You can determine that by looking at the bottom of one of the pages of your notice of assessment.
Another method which is very popular and which i do not recommend (if you are only buying in to reduce the tax) is to buy Flow Through shares.
On an individual basis, these are very risky. If you buy a group, you likely stand to break even or even make a good profit. However, it is very much a 'buyer beware' set of circumstances. �
May I ask you a quick question ? I bought A limited Partnership Land Investment through Walton International around 4 years ago for around 30,000,it is now ready to be cashed in at around 50,000 for a 20,000 profit.I paid it outright when I bought it and was wondering if there is anything I can do to avoid paying tax on it or atleast limiting the amount I pay.
Thanks for your time,
______________________________________________________________
david ingram replies:
The capital gain may be more than you think if you have received any income in the interim. You have to look at the T5013 or T3 or other information slips you have received to see if there has been a Box 42 or other notation amount showing 'return of Capital'. If so, the 'return of capital amounts' have to be deducted from the $30,000 you paid, an action which increases your Capital gain.
After that, one-half of the capital gain is taxable on line 127 of your return.
A simple way of avoiding the capital gains tax on that amount (one-half) would be to buy an RRSP for that amount if you have RRSP room left. You can determine that by looking at the bottom of one of the pages of your notice of assessment.
Another method which is very popular and which i do not recommend (if you are only buying in to reduce the tax) is to buy Flow Through shares.
On an individual basis, these are very risky. If you buy a group, you likely stand to break even or even make a good profit. However, it is very much a 'buyer beware' set of circumstances. �
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