Cap. Gains Likely IQD Tax Treatment

by katt Thu Oct 06, 2011 2:18 pm

Hi Friends

In Canada, Capital Gain appears to be the likely description for tax purposes for the newly valued and converted currency in everyone's possession. It is very commonly described as a 50% tax rate. That is just wrong but it stems from people try to say the following:

When a Canadian taxpayer reports a capital gain, one half of that gain (50%) it not taxed. The other half (50%) will be taxed at that individual's marginal tax rate which varies according to total income and the province of residence of the taxpayer. It is certain that for the large anticipated gains, only the highest marginal tax rates(MTR) will apply and they range fro 39% in Alberta to 50% in Nova Scotia. Ontario is 46.41%.

So as a resident of Ontario, I could say that I will pay 23% tax on my gross capital gain. This would be a number that might be compared with 15% mentioned for residents of the USA. Technically, if someone has a very low income today and only pays tax at 20% MTR then they would only pay half of that on their capital gain - 20% of half the gain or 10% of the whole gain. I just cannot imagine a person living on 20K a year today showing a capital gain of 5M and being able to claim the 20% MTR. If so, I would want to avoid all income this year!

Normally, the only way that this capital gain will be reduced for someone taking ownership of this currency will be if they are carrying capital losses on their books from previous years that could offset some of the gains. The idea that corporations or trusts might make a difference is questionable because each entity files a tax return. Perhaps spreading it around to student children who are paying no tax might work. This topic must be explained by an expert. I just want to clarify that the number 50% is often misstated or misunderstood. We will get help with this in a future call.

Regards
Eric

http://revalue.us/sitec/31327Yud/10