Investment Q&A

Q: In a CCPC, investment income is taxed at a rate of 50% or more , with a partial refund via the RDTOH mechanism. It is my understanding that Corporate class etfs attempt to recategorize income in the form of capital gains, thus not triggering any income until the item is sold. Is this your understanding?

What is your view of these products? What drawbacks do you see? Are there any hidden fees?

Thank you

Paul

Q: How do these two ETF’s compare with respect to withholding taxes if held in a non-registered account

Q: I am having trouble with the Return of Capital(ROC) concept in non-registered accounts. Seems like a losing situation as your adjusted cost base is reduced by the ROC leaving you to pay or lose a greater amount, even tho it is a capital gain and not interest. Also a ROC is my original capital that I already paid tax on. Double taxation?? Please explain as simply as possible tho I know you are not tax experts. Thanks

Q: Good morning.

I have a sizeable amount of US dollars in my TFSA and RRIF accounts and intend to add international investments with that money. I can either just purchase the XEF.u with the US money or go thru the Norbert Gambit process to convert to canadian dollars and then buy the XEF ETF. My question is which would you recommend and also buying XEF.u in my TFSA which I believe is a Canadian listed ETF would there be a 15% US withholding tax on the dividends.

Many thanks.

Q: If I was to hold the TSX listed HXS in a cash account and the value exceeded $100,000 would I be obligated to file a T1135. Thanks.

Q: My spouse and I have a joint investment account and any capital gain/loss or income generated in this account is reported on a 50/50 basis.
We currently hold 3 CDR in the account for a total ACB of $180,000 CAD.
Can we assume that individually we own $90,000 worth of foreign property and skip filling form T1135 or do we have to file because the account itself is over the $100,000 threshold?

Q: what is the most tax efficient way to hold cash? would it be with a dividend stock (assuming the stock stays at the same price) or in an interest bearing account

Q: When an ETF is sold at a loss, does the loss increase because the ETF had received a Return of Capital as part of the annual distribution and you are supposed to reduce your cost by the annual ROC received? Thanks

Q: Just want to confirm my understanding of attribution rules on these points below:
1. If a grandparent gifts $5,000 to an adult grandchild (over age 18) to be used for investing purposes, there is no attribution rules applicable.

2. But no such luck, if gifting funds to a spouse or to a minor child under 18, where the funds are being used for investing. Attribution rules will apply.

3. If a spouse puts the gifted funds in a TFSA, how will CRA be able to track attribution back to the gifter?

Thanks.

Q: Rather than selling a position and buying it back 30 days later, can you double down on a losing position and then sell half 30 days later to capture the loss? I considered options...but sounds like one cannot use options to maintain exposure and still log a capital loss.

Q: good morning 5i,
I know that your usual response to selling when capital gains tax is involved is to sell down until you can sleep at night. Well, when I pay taxes I cannot sleep at night? What is the solution? Currently, with Shopify, Nividia, Meta etc, I have very high capital gains. Some are up to 10 or 12 percent of my portfolio. Should I just bite the bullet and sell down to a reasonable holding? or, just sell up through the end of my next tax bracket? I know these are impossible questions to answer. I had a worker going up on my roof the other day and I was surprised to see him having a very lively conversation with himself about how he should or shouldn't place the ladder. At first I thought this odd. But realising the danger of going straight up 30 feet in the air on a bouncy ladder, I thought it maybe not too stupid. Sometimes I feel that these are not the right questions to be asking you, as they are practically impossible to answer. But, maybe we are talking to ourselves like the ladder guy. You always end up having something useful to say, though, none the less.
thanks

Q: Hi, To my understanding regarding tax harvesting, if i sell X stock for a loss , sell Y Stock or ETF for profit to negate the loss and then buy back Y stock or ETF within 30 days period still i will be able to claim loss in my cash account. Please confirm. Thanks

Q: I feel compelled to chime in on the RRSP discussion, with my personal scenario.

- 25 years still to work
- marginal tax rate 43.4%
- highest tax bracket 50.4%
- Assumed yearly return of 10%


Option 1: Utilize the RRSP for 10k/year:

Balance after 25 years = 1.08 million. Worst case scenario (unlikely) I pay 50.4% tax on the entire balance = 536k remaining.

Option 2: Pay tax on the 10k at 43.4% and have 5,660 left to invest in a cash account.

Balance after 25 years = 612k. Pay capital gain tax of **118k = 493k remaining.

**Capital gain = 612k less cost base of 141k (5,660 X 25 years) = 470k. X 50.4% X 0.5 = 118k.



I am still better off in option 1 with 536k rather than the 493k in option 2. Note that it is also very unlikely I pay the highest tax rate on the entire balance. In reality I will likely to much better than the tax rate used in option 1.


Open to hear if you think I'm missing anything?

Q: With all the tariffs bouncing around, I decided to work another year after starting my CPP and OAS. Although I took 30% tax off both, I still got nailed for taxes because I made too much.
I plan to purchase RRSPs to counter this for next year but I just want to make sure I can still buy RRSPs after 65 years of age. Is that correct?
I realize I'll eventually have to move it all into a RIF by 71.

thanks,

Paul

Q: further to six figure estate RIFF taxations----I am an 88 year old in that high tax bracket.

an additional strategy is to give while still alive to receivers in lower brackets ---- you see what they do with it. I found they use it wisely.

Q: Do you know why I get the following message in my margin account for the first time?

BROOKFIELD RENEWABLE PRTNRS LP 5.5% CUM MIN RT RST CL A PFD LP UNIT SER-7 MLP NON-RES TAX WITHHELD REC 07/15/25 PAY 07/31/25

Q: Hello, I've read the comments on the taxation of RRIF's with some interest as it was a key issue in my career (now retired) as a tax accountant and one I saw repeatedly as I sat across from estate beneficiaries explaining six figure (and higher) tax bills. While there are complicated strategies the best (and least costly) approach for taxpayers with already large RRSP balances ($4-500K for a couple) is to be acutely aware of your marginal tax rate and to ensure RRSP contributions are saving tax at 50 to 53% (Ontario taxpayer) on the way in as it is likely a large balance will be taxed at 53% on the way out. If in a lower tax bracket consider forgoing the RRSP contribution, paying the tax at the lower rate and setting up a non-registered investment account if TFSA's are maxed out. Also, once retired ensure all low and middle tax brackets are being used and do early RRSP (or increased RRIF) withdrawals to make that happen (up to OAS clawback limit at least if not already there for those 65 and older and not deferring OAS to age 70). A non-registered growth portfolio is a tax deferred account like an RRSP with only one-half taxed at death (or when gains actually realized) under current rules. The charitable donation idea is an option but be aware that for an Ontario taxpayer in the highest bracket the donation saves 50% while the tax on the RRIF is 53 for a loss of 3.0 points. The government is certainly in line to collect a large amount of tax from RRIFs over the next 20-30 years as boomers pass away.

Q: Peter's comments about RRSPs and RIFs are from an individual taxpayers prospective. If we look at the design and take a country wide perspective it is much different. If we assume the money put into an RRSP and the tax refund earns a return of x% and we can assume the money goes in a Y% tax rate and is taken out of the RRSP/RIF at a Z% tax rate, the end result is that the money is the RRSP/RIF is totally tax FREE as the tax is balanced by the earnings on the tax refund. It does not matter what X, Y and Z are. Note that this is looking at the country as a whole. Some will earn more X and some less but the average of the whole country will be X and the average tax rates will be Y and Z and some will chose to spend their tax refund but eventually the money will end up with someone who invests it. So the entire RRSP program is essentially tax free money for the economy over the programs' life. I've done the numbers back and forth and it always turns out the same way. So if you save the tax refund, invest it, pay tax on it, it will eventually pay the tax on your RRSP withdrawals, "on average".

Q: Hi 5i,
I've just read Thomas's question regarding taxation on RRIF's. He has absolutely identified a serious issue affecting taxpayers and estate planning, which I see often in dealing with estates through my work.
The tax deferment we receive by contributing to RRSP's pays the government off in spades when the day comes that the resulting RRIF (or the RRSP if no RRIF has yet been created) is taxed.
If a spouse dies and his/her spouse is beneficiary of the deceased's RRSP or RRIF there are no tax consequences - a spousal rollover applies, and taxes continue to be deferred. However, when the surviving spouse (legal or common law) dies, the entirety of the RRIF in that person's hands is taxed as income of that deceased person in their year of death. I have seen many cases where the RRIF of a surviving spouse is made up of both his /hers and that of the deceased spouse and is worth in excess of $5M. That is a whole lot of income for an estate to pay tax on at one time. (Because investments held in a RRIF are considered income at the time of death they are not taxed based on capital gain, which would result in less tax being owed - their value at death is deemed to be income.)
I don't believe there is any way around this costly trap except to control taxes while living by taking considerable money out of a large RRIF every year and paying tax on it in affordable chunks. Other than that, surviving children are going to bear the brunt of the tax liability when the estate of their last to die parent pays income tax on whatever is left in the RRIF at the time of death.
If any of your readers have other strategies for reducing tax on large RRIF's I'd sure like to hear them.
Peter

Q: Tax related question. Considering that now, settlement date is one day, stocks sold on July 30 will still be eligible for tax loss if the end date (for tax purpose) is July 31, yes?

Thanks