Interesting information for those that trade stocks.
Russett is undergoing an audit this week, and they are focusing on my trades. Darth Vaders (auditors) are looking for people who trade more than 50 trades per year, who may borrow (includes using margin) are quick flippers rather than long term holders which are defined in months, not weeks, and invest in risky or volatile stocks. If you do any of these things, it is likely that Darth Vader will be visiting you to declare your capital gains and losses as business income, 100% income. They like to wait for you to really hang yourselves,...they will wait for three or four years before they pounce on you.
I should point out some additional items.
If you borrow money to invest in stocks, it better be for interest or dividends, because if it's just for capital gains, and you try to claim any appreciation as capital gains the interest deduction will be disallowed according to my Darth Vader. If you claim the appreciation as business income, the loan interest becomes deductible.
Secondly, I have visited 4 accountants, 2 from the big prestigious firms, and none of those !@#$%^#&*@&#^$ gave me the right advice about this trading stuff in years gone by. It is just a fluke that I started to do this a year ago, and that was very lucky, because although the Darth Vaders are not charging penalties, they will charge interest on income switched from capital gains, and this could go back several years,...4 in my audit. Luckily for me, I have substantial expenses to counter the income made, and some losses I can carry back, or I could have been up chit creek without a paddle.
If any of you think you are borderline, you might want to ask an opinion directly from Revenue Canada. Remember they are looking at the number of trades (+50 per year), the volatility of the stocks, the size of bets and risk you take on, whether you use margin or loans, and how long. Any one could push you over.
Also, you better keep damn good records, and be able to quickly answer all Darth's questions,....nothing gets them more pi$$ed off than evasive answers and numbers that don't add up. Make a real effort to get along, even if you feel your world is coming to an end.
On the good side, this guy knows his stuff better than any accountant I've talked to,...trips to PDAC, Cordilleran, minesites, courses, Northern Miner, office in the house, cable for ROB and CNBC, internet, stockwatch, computer costs, etc., etc., are all deductible, and accepted without question when supported by receipts.
Good luck,...Russett, slightly squished hamster. |
