# Capital Gains - Minimization of taxes



## DavidJD (Sep 27, 2009)

When paying down debt there is a general rule, highest interst loan first, smallest loans first, min payments on the others until one is paid off then apply previous payments onto remaining loans...

Also there are general rules about what and where you hold equities etc. Favourably taxed Canadian dividend paying stocks outside of sheltered accounts versus other things etc.

I am wondering, is there a general guide to follow for minimizing taxes on capital gains?

I have 4,000 units of a Canadian company that was paying 13% at $12.05. It has now risen to over $20 and climbing. I would prefer to reallocate this to rebalance my portfolio (have $80,000 of it) but the yield is still generous (7.6% at current price).

I am also wondering if I should even bother since the yield is as good or better than other options out there and I would simply trigger a taxable gain, trading fees...

But if it better to do so,

My wife and I have plenty of RRSP room (and growing) and our tax bracket is @ 35%. Could trigger the gains and soften the tax with the RRSP rebate...

I could also withdraw upto $50K from each of our TFSAs and plunk ALL of these in both of our accounts (the next year) and no longer pay taxes on the dividends, but still trigger a taxable gain.

I generally buy and hold, however I made a bad investment into an opportunity, I sold a loser and managed to get a taxable loss of 12K which permits me to have a gain of $24K (write off the 50% gains or $12K carried forward from 2010) with no capital gains tax. I understand this can be carried forward for 3 years. I normally have other gains throughout the year so the $24K of room won't go too far.

Or I could hang onto them and sell small amounts over time... 

Any strategic suggestions to lessen taxable gains are welcome!


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## andrewf (Mar 1, 2010)

As I understand it, you can carry losses as far forward as you like, but can only offset them with gains in the previous three years.


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## FrugalTrader (Oct 13, 2008)

As Andrew mentioned, you can carry forward capital losses indefinitely. If it was me, I would claim the capital loss against the gain, then make a RRSP contribution to offset the remaining capital gains tax payable.


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## humble_pie (Jun 7, 2009)

hope you will forgive if i say i did not read through all your tax calcs, it's bad enough having to do my own this time of year.

here's a small thing i do to mitigate against big capital gains hits.

i try to keep a cost base adequately below, but not too far below, market price. This i manage by closely timing a small trade in an affected security (ie low cost base) occasionally, but not more often than once a year. In a quiet-to-dipping market, i might sell 200 or 300 shares of a stock in which i have a large holding with a significant paper gain. Then quite soon i buy them back again. The ACB for both the overall holding and the ACB/share will then rise somewhat.

repeat the following year if necessary. There will be a taxable capital gain, but the dollar amount will be tolerable because it involves only 200 or 300 shares. All one has to do is breakeven including commish with such a fast trade.

notice that the 30-day rule applies to claiming losses, not reporting gains. If one disposes with a gain, one can buy back even on the same day to restore the total holding.

in this way one avoids holding say 4000 shares, each with an $8 paper gain, as you now hold ... one might instead hold say 4000 shares, each with a $3 paper gain ...

not a perfect solution ... just another tiny tool in the tool-box ...


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## DavidJD (Sep 27, 2009)

Humble Pie -can you explain further? I suspect this is what I should be doing...seems complciated.

How is the ACB affected?


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