# Active or Passive?



## shoichi (Nov 15, 2009)

Hello all

Been doing a ton of search about incorporating to conduct my day trading business. 

for a few days, offshore incorporation seemed like a very good idea. read a lot about it. the possibility of ZERO tax on my gains is very tempting. but decided against it as it just takes one time to get busted to ruin you reputation and drain your bank account.

was talking to a couple of accountants about whether income from day trading would be considered passive or active income. to my amazement, they couldn't give an answer. one said it's 'question of fact' and the other said he has no experience in dealing with traders so doesn't know. 

so i m back again to the great world wide web asking my fellow investors and traders. would income from my day trading activities in my company be considered active or passive income?

i sure hope it is active because then i can qualify for small business tax deduction, a rate of 15.5%..... can't beat that eh.

and any recommendations for a GOOD accountant in Ottawa or even Toronto that's knowledgeable of traders' issues will be very very very much appreciated. 

you guys rock


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## Canadian (Sep 19, 2013)

I can't direct you to accountants in the Torornto / Ottawa area, but I can offer a piece of guidance:

As Amadan discussed above, CRA will look at the corporation's main business and revenue generating activities. Another factor, which has been used as a precedent in Canadian tax court rulings is the effort it takes one to conduct such trades. If it can be shown that a business (no matter its description, sources of revenue, or industry) uses an amount of effort to research and manage a portfolio, it is considered to be active income. If the defendant in such a case (the business) can demonstrate that the trades are effortless and take virtually no time away from the primary business activities, there is a much better chance of a ruling in the favour of passive income.

Disclaimer: I am in no capacity to offer formal legal, tax, or business advice on this forum. Any guidance should be taken simply as guidance, and nothing more.


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