# Turning my Taxable trading account into a business?



## Steve Divi (Jul 14, 2016)

Hello, 

Has anyone thought, or have any information on turning an investment account into a business for the purpose of tax deductions?

I will probably have significant capital gains to report on and no way to offset any expenses.

Any information or guidance would be greatly appreciated.

Thanks,
Steve


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## Eclectic21 (Jun 25, 2021)

My understanding is that if you meet enough criteria with your activity/knowledge then the whole investment account is converted to business income. 

That means reporting all gains the same as one would report business income (i.e. at a higher tax rate than capital gains). It also means that losses can be deducted from other income instead of being limited to being deducted from capital gains.








TaxTips.ca - Tax treatment of investments - capital or income?


TaxTips.ca - When are gains on losses on sales of investment considered capital gains or losses, and when are they considered income (100% taxable or deductible)?




www.taxtips.ca





Are you sure this change is worth the increased tax rates on the account gains?


It seems to me that a better route would be to find investments with large capital gains, donate them to a charity and have the CG set to zero while receiving a charitable donation receipt for the full value of the investment.








Guide to Donating Stocks, Securities and Mutual Funds | CanadaHelps


How to Make Charitable Gifts by Donating Stocks, Securities and Mutual Funds




www.canadahelps.org






Cheers


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## Spudd (Oct 11, 2011)

Steve Divi said:


> Hello,
> 
> Has anyone thought, or have any information on turning an investment account into a business for the purpose of tax deductions?
> 
> ...


Capital gains are taxed at 50% of what normal income is taxed at, so you'd have to have a LOT of expenses to make reporting it as a business a better option. (Commissions are removed from the gain, so you're not taxed on commissions.)


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## Retiredguy (Jul 24, 2013)

Here's a link that speaks directly to the issue you asked about.

41d98412-5a0f-4668-b185-6d97e297d84e (rbcwealthmanagement.com)


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## ian (Jun 18, 2016)

Keep in mind that are some deductions that you can apply to investment income.

Interest on money borrowed to finance the purchase of those equities can in fact be deductable. My BIL has for the past 10 years or so, used his heloc to invest. His gain has been the spread less his heloc interest cost.

We deduct our investment advisory fees and spousal interest against our investment income....which includes taxable capital gains, etc.


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## AltaRed (Jun 8, 2009)

Steve Divi said:


> Hello,
> 
> Has anyone thought, or have any information on turning an investment account into a business for the purpose of tax deductions?
> 
> ...


What expenses could you possibly have besides commissions (and interest from investment borrowing such as margin) that are already legitimate deductions off capital gains? 

The perfect answer is only capital gains and no expenses paying a ton of income tax.


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## MarcoE (May 3, 2018)

The Trudeau administration has made investing in Canadian businesses even more unattractive than it was before. You're better off investing in personal, non-corporate accounts. Inside a company, dividends and capital gains are taxed at the highest rate from the first dollar. There are a few mechanisms to reduce that tax burden, but they involve passing the dividends over to you personally -- so they might as well be in a personal account to begin with. Unless you have very high operating costs to deduct, for investing purposes only, you're better off investing in personal accounts and NOT inside a business. But running a business has other advantages, so it really depends what else you're looking for. If it's just a place to park stocks and bonds and stuff, they're better in a personal account.


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