dave@lsuc.uucp (David Sherman) (01/25/88)
Quick overview of what's happened with capital gains, assuming
the Tax Reform proposals are enacted:
Capital gains are 2/3 taxed in 1988 and 1989. That means if
you have a $3,000 gain (say you buy a stock for $7,000 and
sell it for $10,000), you include $2,000 in income.
The top tax rate is now about 44%, depending on your province
(the top federal rate is 29%; provincial rates vary but Ontario
is a typical example with the provincial tax being 50% of the
federal tax). So the top effective tax rate on capital gains
is around 30%. (This is up from 25%, which was 50% tax on
1/2 inclusion of the gain.)
If you buy a property and sell it relatively soon, or if
the circumstances otherwise suggest that you purchased it
as an "adventure in the nature of trade" rather than as
capital property, the gain may be fully included rather
than 2/3 included. You can prevent this happening with
Canadian securities (stocks, bonds, etc.) by filing an
election (Form T123) to deem all such securities to be
capital property. If you do so, however, that decision
is made for life. (And so any losses would be only capital
losses, not usable against other income.)
Incidentally, the Tax Reform proposals haven't appeared in
the form of draft legislation yet. The latest was a Notice
of Ways and Means Motion with the proposals stated in general
language, which was tabled on December 16, 1987. (And the
February 1987 budget proposals were enacted on December 17, 1987.)
David Sherman
Income Tax Consultant
--
{ uunet!mnetor pyramid!utai decvax!utcsri ihnp4!utzoo } !lsuc!dave