Investment Q&A

Q: My question is about tax efficiencies on yields and distributions.
Has anyone created a table to demonstrate the tax implications for stocks? Can this be easily determined? Should REITs always be in TFSAs? What are the tax savings regular acct vs TFSA? How or what would the dividend tax calculation be for the stocks I mentioned?

Thanks for your support
Mark

Q: More fuel for the tax loss selling debate is the prospect of a higher future capital gains tax rate where (hopefully) losses would be worth more also. With federal govt. spending showing no sign of abating and increasing interest payments on its debt, it's possible this issue will be revisited in the next budget.

In Paul's scenario it's possible more tax will be paid by taking the loss now and paying much more later with the greater cap gain on the stock price.

Also, tax rates tend to rise evidenced by tax freedom day getting pushed further along in June, and there's the phenomenon of bracket creep to consider.

Q: I hoped I could shed some light for Paul regarding his question on tax loss selling.

Most people on this site are buy-and hold investors rather than traders. Their thinking is that they can sell, harvest a tax break from the loss, and then buy it back to hold for a long period.

In short, they are aiming to continue holding it for the long term, but getting a tax benefit in the short term by quickly selling and buying it back.

5i - please publish or not as you see fit.

Q: We plan to begin annually to withdraw funds from our RSP investment accounts and transfer the amount minus the withheld taxes in a cash investment account. The funds are not needed at this time but the purpose is to reduce future taxes,although we are aware that we will be paying taxes on 50% of the Capital Gains in the cash investment account as well as taxes on dividends. With the stock market being at a low at this time is it a good strategy to do the withdrawing and reinvesting at this time ?

Q: I would like to capture a tax loss on Otex. Would Engh be a good proxy while I wait to decide whether to rebuy Otex. As always, thanks for your help.

Q: I have seen in several answers you say you are encouraging tax loss selling in this market. Why? I don't see the reason to do that.

Let's use a hypothetical example. Last year I bought $10,000 of stock XYZ. It's fallen 50% so my paper loss is $5000. I sell the stock for a capital loss of $5000. I buy the stock back in 30 days (at the same price I sold it at), or I buy a proxy stock using the $5000 from the sale. Lucky me, one year from now stock XYZ has doubled and I now have a paper capital gain of $5000 (or the proxy stock I bought has doubled, and I have a $5000 gain). I sell the stock XYZ (or the proxy) and have a capital gain of $5000. The loss I generated from tax loss selling offsets the gain I made one year later. Net effect is 0, other than trading commissions.

If I had simply kept the stock XYZ, one year later I would be back at breakeven, no gain or loss.

If you believe in the stock as evidenced that you buy it back 30 days after selling it, or you buy a proxy and keep that, I don't see the point of tax loss selling for the sake of it. If you buy something completely different, that's a different story. But reading through the Q&A must people intend to buy the stock back in 30 days.

For this example keep in mind that the financial situation doesn't suddenly change; my tax bracket remains the same during this example.

Please explain why you are encouraging tax loss selling at this time. I don't see the point of doing this if you intend to buy back the same stock, and you remain within the same tax bracket. If you are relying on the stock being lower 30 days later when you buy it back that is market timing.

Paul

Q: Would you have a proxy for ILMN and UPST for tax loss selling? Would you buy them back after 30 days or keep the proxies. All within the same risk/upside potential.
Thanks for your service!

Q: I had a huge gain with LSPD and then poof it was gone lol, thinking of selling it now for the tax loss and rebuying back In 30 days, should I look for a proxy (suggestion) or should I just sell and chill for 30 days, thanks, Jean

Q: Good Day to 5iteam: Would you consider this fund a good candidate to crystallize a loss or a better to hold if other options are available? Down about 9 to 10%. May consider buy back in 30 days but in no hurry for the income I bought it for in retirement. Tks. Larry

Q: Hi there.

Just a follow up to an earlier question.

1/ Do any of the HHL ETF distributions qualify for the dividend tax credit?

2/ Are any of the HHL ETF distributions subject to a withholding tax?

Thanks very much.

Q: Hello 5i
A question about investing on margin. I have heard a few people extolling the praises of investing with borrowed money. Some even prefer it to making extra money through selling options. It is easier, less time consuming, has the benefit of lower taxes because of favourable dividend and cap gains rates. But, one thing i can’t understand is that some people advocate investing on margin at the same time as they seem to hold a fairly large cash reserve. It seems to me to be more reasonable to use your cash reserves before borrowing. Am i missing something here. Or, does this practice not really make sense?
Thanks

Q: Seeking clarity on corporate class etfs. Does this structure exist using US dollars and does it exist in the US? Is there any other provider other than Horizons? Does the structure result in dividends being reinvested in the etf thus becoming taxable as a capital gain when the etf is sold and therefore not taxable as dividend income while the etf is held? So does this structure assist an investor who wishes to reduce income for tax purposes during the period the etf is held? THANKS

Q: Concerning a canadian ETF,or a covered call ETF ,that pays dividends,but includes mostly US stocks or foreign stocks in a non-registered account : are the dividends fully taxable ? or has the fund already paid the foreign taxes on dividends and is then eligible ( automatically or one has to fill a specific form ?) for a canadien tax crédit ? Thanks

Q: I own GOOG shares in a US account at 982 US, or converted to Cdn $ at 1,299.97. I also own the GOOG mini shares at 23.35 Cdn$.
Am I correct that I have to add these shares to calculate my ACB, 1299.97+23.35=1,323.32/2=661.66?
Or are the shares considered separate with each having their own ACB?
Thank you. cheers

Q: I own SHOPIFY in both my TFSA and in a taxable account at much higher prices. I also have cash in my TFSA with which I would like to buy more SHOP at todays price. I would like to then sell the shares in my taxable account immediately to lock in the tax loss after purchasing extra shares in my TFSA. Is this allowed or does the 30 day rule still apply ?
Thanks for your professional guidance.

John

Q: Hi

TD Bank sells GICs for several other banks. Suppose I purchase two GICs through TD Waterhouse, both for 100K: one held by Homequity Bank and one held by BNS. Is the CDIC insurance limited to 100K since I bought through TD, or would both GICs be covered?

Thanks

Q: The difference between these two is fairly wide. I am under the impression the gap should have closed over time but it remains fairly high. I have a small number of shares of BIPC and a larger number of BIP.UN. Thinking of selling BIP.UN and buying BIPC with the proceeds, both have some gains. Both in a Cash account. Thoughts?
Thank you.

Q: In other answers I see that you are recommending tax loss selling. My positions in PYPL and ROKU are down about 50% and they're large enough that the tax loss would definitely benefit me. However, I'm worried about selling them because I feel like if the market improves, they could bounce back to the point where my benefit from the tax loss is nullified by the missed bounce until I can re-buy after 30 days. (For reference, if they bounce back to their early April prices, that would outweigh my benefit from the tax loss).

On the other hand, I think both are attractive at today's prices so if I don't sell for a tax loss I would probably add a bit to both positions.

Do you like PYPL and ROKU at today's prices (to add to current positions) or do you think they're better targets for tax-loss selling and re-buying in 30 days?

Q: I've owned Pender Growth for a long time and done very well. I've accepted the high fees and volatility as the price of ownership.
But , it's now heavily concentrated in one stock - Copperleaf - and has followed CPLF's downward trajectory.
Want to make sure I am understanding this correctly , because , if so, this concentration puts me beyond comfort level with dollar value tied largely to the fate of CPLF.
Your general thoughts on PTF and its current composition appreciated .
Thank-you.

Q: Thinking of locking in losses for tax purposes on these two. What would be a good proxy or proxies for the 30 day period?
Thank you.