interesting read from the national post
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I would like to get a refund on this stock, please
Capital gains strategy
Rita Monaco-Mancini
The Gazette
Many investors are pulling in big bucks thanks to this red-hot Canadian stock market, which is currently the envy of
the investing world. But those proving to be the most successful are beginning to wonder how much more they'll
end up paying in taxes because of their success.
One reader, who faces that problem, wrote and asked: "I've been selling quite a few stocks and will realize a capital
gain of over $100,000 this year. Can I claim a loss on the stocks I still hold in my portfolio, but are worthless --
such as stocks reduced to a penny, or Eaton -- to reduce the gain?"
Indeed, if you've made a large capital gain during the year, it's a good idea to reduce it by offsetting the profit with
losses. Stocks that are practically worthless seem to be excellent candidates for a writeoff. According to the Canada
Customs and Revenue Agency, if the shares are delisted or not tradeable, they can be claimed as losses if the
company is "lifeless" or bankrupt. You should check their status with a broker.
If there is any chance of the company and its shares coming "back to life," the government will not accept the claim.
Some people have made a claim for a loss anyway and their returns have gone through without an audit. But the
revenue departments have the right to verify returns in the future, so these taxpayers never know if and when their
returns will be audited.
Another option to reduce capital gains is to sell the stocks outright at whatever they're listed at and take the loss. If
there is any doubt in your mind about their prospects, you could sell them to someone whom you wouldn't mind
making money (but not to your spouse) if a miracle happens and they go up in value.
Holders of registered retirement savings plans or registered education savings plans might consider transferring
shares that are practically worthless to their plan. The benefits are twofold. You get a credit for your contribution
and, if ever a miracle happens and the company picks up, the gain is made within a tax-sheltered plan.
Unfortunately, if on the day of the transfer, the stocks are "sold" to your plan at a loss, the loss is not deductible.
As for Eaton stock, shareholders will have to wait at least until 2004 for a settlement, if any, to be made. You won't
be able to claim the loss until then.
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