Capital Gains Or Losses - Tax Savings Ideas
If you are going to sell shares or other capital property and will realize a gain, consider delaying the sale until after December 31. This will put the gain in the new tax year and consequently the tax will be deferred until April 30 of the year following the disposition. This could result in a deferral of tax of 14 months.
Capital losses can be carried back 3 previous tax years or forward indefinitely to offset capital gains in those years.
Some capital losses can be classified as Allowable Business Investment Losses (ABIL's) and consequently the loss can be applied against any type of income such as employment or business.
Under certain circumstances such as selling Qualified Small Business Corporation shares or Qualified Farm Property, up to $500,000 of the gain may be sheltered against tax.
If you sell shares or other capital property at a gain, but will receive proceeds over a period of time, it is possible to defer a portion of the tax on the gain. The maximum allowable deferral is 80% of the gain in the year of recognition decreasing by 20% per year. In effect, the maximum gain you would have to recognize is 20% per year.
Gains on the sale of your Principal Residence are tax-free but only one residence per year can be designated as a "Principal Residence". Some people own a house or two and possibly a vacation cottage. It may be possible to designate any of these properties as a "Principal Residence". This may be beneficial where say the vacation cottage is expected to be sold at a larger gain than the house you normally inhabit.
Careful planning with a Chartered Professional Accountant is warranted. Contact Keith Anderson, BCom, CPA, CA-IT, CITP at (780) 447-5830 if you need advice.
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