# Selling a stock then rebuying it less withing a few weeks, what gains is paid?



## originailwhitebricks (Dec 11, 2020)

I purchased a stock two years ago, this year it did incredible, then it dropped so I panicked and sold about 70% of it. 

made almost a 500% return, then regretted the sell as I watched it climb, it fell back down again so I purchased some the stock back (20% of my original total) for a little bit less then my 1st sell. 

In total now I own 50% of stock on my original purchase.

Come tax season what capital gains would I pay? Do I pay the gains on the 50% that I sold or the 70% I sold even though I purchased 20% back within two weeks?

Thanks


----------



## Money172375 (Jun 29, 2018)

You need to figure out your adjusted cost base for each transaction.
a lot of people use this site. Adjusted Cost Base.ca - The Free and Easy Way to Calculate ACB and and Track Capital Gains
It’s easy to use. You enter each transaction when buying or selling.

you’ll get a tax slip showing the proceeds of disposition. Ie. the sale amount. It’s up to you to calculate your costs to acquire as at the time of sale.


----------



## originailwhitebricks (Dec 11, 2020)

OK so let's say I purchased the stock for 1$ and two years later sold 70% it at 6$ made 5$ per share on 70% of my initial purchase 2 weeks later I buy 20% more of the same stock at 5.50$ per share.

My total owned now is 50% less then what I purchased at 1$

I'm just trying to understand so I pay tax on the 50% of the stock i sold PLUS the .50 cents on the stock amount I repurchased?


----------



## Money172375 (Jun 29, 2018)

If I’m understanding correctly, you will pay tax on the $5 per share you made. The subsequent purchase affects the cost basis for the next time you sell. Don’t forget that commissions are also part of your cost base. I’d highly recommend using the website link I provided and enter in all the transactions you’ve made. It should become quite clear.

when doing your taxes, you’re not necessarily entering how much you made. You’re entering what you paid for the stock, and what you received. When you have multiple purchases over time, the amount you paid (weighted average) floats up and down.


----------



## BigMFfan (Feb 23, 2013)

originailwhitebricks said:


> OK so let's say I purchased the stock for 1$ and two years later sold 70% it at 6$ made 5$ per share on 70% of my initial purchase 2 weeks later I buy 20% more of the same stock at 5.50$ per share.
> 
> My total owned now is 50% less then what I purchased at 1$
> 
> I'm just trying to understand so I pay tax on the 50% of the stock i sold PLUS the .50 cents on the stock amount I repurchased?


You pay tax on your total taxable capital gain, which in the above example is 50% of $5 times the number of shares you sold, less transaction cost. Your later purchase has no bearing on this capital gain (it would only be relevant if you had a capital loss on the sale transaction). The second purchase just gets added to the ACB of your remaining shares.


----------



## Tostig (Nov 18, 2020)

In the tax return schedule 3, copy the capital gains table into your spreadsheet where you keep your stick trading transactions and records.

So going forward, you have a running record of your capital gains and losses you might need to report in your tax returns as if you had to report them immediately.

If you had originally purchased 100 shares of something and you sold 70 shares, you'll need to split the records of your original trnsaction into 70 & 30 including the buying commission.


----------



## Eclectic12 (Oct 20, 2010)

originailwhitebricks said:


> .... I'm just trying to understand so I pay tax on the 50% of the stock i sold PLUS the .50 cents on the stock amount I repurchased?


Buying makes no difference to the capital gains tax on a sale in the past. What it does is change the cost base for the shares still owned.

Skipping some of the columns on schedule 3, part 3 to keep things simple,
Proceeds - Cost of shares sold - Expense to sell = CG or CL

If I understand your example numbers right and assume 100 shares were bought with a ten dollar commission (selling or buying)
Proceeds is 70 x $6 = $420
ACB for 70 shares sold = [(number shares bought x buy price) + buy commission ] x % sold = [(100 x $1) + $10] x 70% = $110 x 70% = $77
Expense to sell = $10

$420 - $77 - $10 = $333

Assuming that's the only CG, at the bottom of Schedule 3, the CG of $333 is multiplied by 50% to get the taxable capital gain which is $166.50


You've still got thirty shares whose cost base is $110 x 30% = $33
When you buy more shares, that cost is added to the total.
New cost base = shares owned cost base + newly purchased shares cost base = $33 + [(number shares bought x buy price) + buy commission ] 
= $33 + [(20 x $5.50) + $10] = $33 + $120 = $153 for fifty shares owned.


Cheers


----------



## Mazzawi (Sep 8, 2018)

The capital gains vs income depends on determining if you are a trader or investor.

How often are you trading and do you have other sources of income.

Are you buying stocks for the dividends income or using stocks to save money for the future.

Or are you buying abd selling stocks for the purpose of making money from trading.


----------



## RussT (Jul 11, 2016)

Just checking...were the stocks purchased, sold and repurchased in a non-registered account or in a TFSA or RRSP? This is not clear from what I have read above.


----------



## Spudd (Oct 11, 2011)

RussT said:


> Just checking...were the stocks purchased, sold and repurchased in a non-registered account or in a TFSA or RRSP? This is not clear from what I have read above.


You're right it's not clear. The assumption everyone made who replied was that it was in a non-registered account. If it was in a TFSA or RRSP there would be no taxation implications at all.


----------



## Just a Guy (Mar 27, 2012)

Did you wait long enough before you rebought? There are rules about doing this, but I forget the details of it right now.


----------



## Eclectic12 (Oct 20, 2010)

The sale is for a capital gain so when the additional shares were purchased won't matter. If it was a sale for a capital loss, then the superficial loss rules make the timing important.


Cheers


----------



## ions (Mar 23, 2012)

I have a very similar question. Let's make the example simple.


Suppose I bought 100 shares at $1 on June 1, 2020.
Suppose I sold 100 shares at $3 on Dec 1, 2020.
Suppose I then buy back 100 shares at $3 on Dec 2, 2020 and hold these shares into 2021.
My tax implication is $200 capitals gains and $100 is added to my taxable 2020 income while going forward into 2021 with a $3 average instead of $1 average. Correct?

<< The sale is for a capital gain so when the additional shares were purchased won't matter.

So I can simply sell and then immediately buy back within a minute to move my average up to $3 for 2021? My income is very low this year and I expect a higher income in 2021 so this sell and buy back process makes sense to offset capital gains next year. Correct?

Thank you


----------



## Eclectic12 (Oct 20, 2010)

Assuming this is the only taxable account that holds that stock, selling everything then re-buying disconnects the cost base from each other. It also simplifies the Schedule 3, Part 3 reporting as the full numbers can be used.

You numbers look right to me ... though in real life, the CG is likely lower and the cost base going forward is likely higher due to including buy and sell commissions.

Selling for a CG means CRA doesn't care about the timing of the re-buy as a CG is generated.

If income is low this year but will be higher when selling in the future, it makes sense. 


Cheers


----------



## ions (Mar 23, 2012)

Thank you for your response Eclectic12


----------



## ions (Mar 23, 2012)

If I sell on Wednesday December 30th, 2020 does the Capital Gains apply for the 2020 calendar year or 2021 due to the 2 day stock settlement period?

Thank you


----------



## Eclectic12 (Oct 20, 2010)

I'd expect the sale in 2020 to apply to 2020 despite the settlement date being in 2021. I've never sold that close to the end of the year so I have not looked for confirmation.


Cheers


----------



## fireseeker (Jul 24, 2017)

ions said:


> If I sell on Wednesday December 30th, 2020 does the Capital Gains apply for the 2020 calendar year or 2021 due to the 2 day stock settlement period?
> 
> Thank you


It applies to 2021.

From BMO Nesbitt: "The expected last buy/sell date for Canadian securities to settle in calendar year 2020 (based on trade date plus two business days) is Dec. 29."


----------



## ions (Mar 23, 2012)

Thank you fireseeker.


----------

