Francesca Giroux, CPA
For the Lakeside Leader
Capital gains or losses incurred when shares or securities are sold are to be reported on Schedule 3 of your personal income tax return. Shares or securities refers to publicly traded shares, units in a mutual fund trust, shares that qualify as Canadian securities, and shares issued by foreign corporations.
When you buy shares you do not receive a tax slip, so you will require documentation indicating the purchase date, price, and number of shares purchased. In addition, you will also need the documentation from when the shares were sold, indicating the date sold, number of shares sold, and the sale price. If the shares were from foreign corporations, the gain or loss should be reported in Canadian dollars using the exchange rate in effect on the date of the sale, or if there were multiple transactions for shares of the same corporation throughout the year, the average annual exchange rate should be used which can be found on the Bank of Canada website.
To calculate if you have a capital gain or loss you will need to know the proceeds of disposition, the adjusted cost base (ACB) and the expenses incurred to sell the property. The gain or loss is calculated by subtracting the total of your property’s ACB and the expenses incurred to sell the property from the proceeds of disposition. The ACB of the property is the cost of the property and the expenses incurred to acquire it (i.e. commissions and legal fees).
If a property is sold for more than the total of the ACB and the acquisition expenses you have a capital gain. If the property is sold for less than the total of the ACB and the acquisition expenses you have a capital loss. The capital gain or loss is then multiplied by the inclusion rate for the year to determine the taxable portion. For 2017, ½ of your capital gains are considered to be taxable and ½ of the capital losses can be applied against your taxable capital gains to reduce them to zero. If the capital losses are more than your capital gains you will have a net capital loss for the year that can be applied against taxable capital gains of the three preceding years or, can be carried forward to apply against capital gains in any future year.
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Information provided is of a general nature. As each individual or company’s situation is unique, you may wish to consult with your CPA for information specific to your own needs.