# Income Tax Return for 2010



## 50invester (Feb 10, 2010)

I have a margin account with Questrade and as a newbie I am confused about how I will come up with my calculated Capitol Gain/Loss for the year. I have done around 100 trades and have moved money in and out, as well as purchased some US Vanguard ETF's. It seems that the broker does not do this for you. Is there software I can purchase to help me or do I need an accountant or is it relativily simple? For those of you who have done this many times, does it involve actually going through every trade and calculating. What about commissions? Many questions? Any advice would be greatly appreciated. Thanks.


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## Argonaut (Dec 7, 2010)

This thread might help you on Questrade specifically.

http://forums.redflagdeals.com/gain-loss-tax-2010-using-questrade-help-998804/


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## OhGreatGuru (May 24, 2009)

People should be obliged to pass a test on income tax reporting before being allowed to have self-directed bokerage accounts.


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## 50invester (Feb 10, 2010)

'Perhaps people should be obliged to know the entire 'Highway Traffic Act' backwards and forwards before they are allowed to drive a car'. Thanks for the advice.


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## warp (Sep 4, 2010)

50INVESTOR:

Heres the simple answer.

anything you SOLD during the year will create a capital event..either a gain or a loss, ( based on what you paid to purchase it)

1) figure out what you paid for any stock, etf ,fund , etc that you bought.
If you bought at different times and different amounts add all the costs together to get an average cost per share. add all commissions to your cost
Its actually easy but might be time comsuming as you will receive a "confirmation notice" for anything you buy or sell from your broker.

2) when you sell all or any part of your holdings mark down what you are credited..what you received from the sale.( you will also get a "confirmation notice" for the sale from your broker.)

3) subtract one from the other to see whether you have a gain or loss on each transaction.

4) add up all the transactions you have in each calender year...the gains and losses together....if the sum is plus ,,you have a yearly capital gain....if the sum is negative you have a yearly capital loss.

5) capital losses can be carried BACK 3 tax years to recover taxes you may have paid in those last three years on capital gains ...just call CRA,,,its easy to do.

6) capital losses can also be carried FORWARD forever to use against any capital gains you may have in the future.

7) if you are in a margin account, and/or are paying interest to your broker to buy stocks,,,you can deduct that interest off your taxable income...its called a "carrying charge"...and totally deductible agaainst income in the year you incur the cost. ( its on schedule 4, and goes on line 221 of your tax return.......its easy, but something many people miss.....by the way when you buy bonds and pay the accrued interest , this is also a carrying charge and should be deducted....many many investors miss this.)

If this sounds complicated... that means its way above your head...see an accountant.


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## lewin (Jan 10, 2011)

50invester said:


> 'Perhaps people should be obliged to know the entire 'Highway Traffic Act' backwards and forwards before they are allowed to drive a car'. Thanks for the advice.


Seriously? All drivers *are* obligated to know the rules of the road. "But I didn't know I couldn't pass on a solid line" won't stop you from getting a ticket and "I did know how to calculate my capital gains," wont' stop CRA from coming after you either.

Edit to add: Sorry to sound harsh. I mean that taxes (and driving) are complicated and it's not unreasonable to expect that people should know the rules before jumping in.


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## Homerhomer (Oct 18, 2010)

OhGreatGuru said:


> People should be obliged to pass a test on income tax reporting before being allowed to have self-directed bokerage accounts.


And anyone owning a house should be a certified plumber? Nope, anyone who owns a house and knows nothing about plumbing should either learn how to do it or hire a plumber.


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## Homerhomer (Oct 18, 2010)

In addition to what Warp already explained:

1) you need to report everything in CAD dollars
2) transaction fees reduce your capital gain
3) I don't know if your brokerage will send you a proper capital gain report, if they don't then simple transaction summary may not do the trick because:
a) they will not account for securities purchased prior to the calendar year
b) they often will not have proper cost base if you transfered securities between different brokerages
c) there is also an issue of superficial losses (if security was sold at a loss and repurchased within 30 days)

Years ago I used excel spreadsheets but quite frankly for someone who is not familiar with the concept they wouldn't be very helpfull.

As Warp suggested, if you are not comfortable with it, have someon handle it for you, better (and cheaper) to have it done right than deal with CRA later on.


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## KaeJS (Sep 28, 2010)

50investor,

I opened a margin account with Questrade in early 2010 as well. This will be my first time reporting taxes on capital gains/losses.

You can go to the penson website, login, and under reports you can find a profit and loss report. You can have it emailed to you in pdf format. It must be emailed to you or you will not have the profit/loss automatically calculated for you. The table that penson shows you online is garbage. Make sure you email it to yourself.

Look at the pdf. All trades will be grouped together by ticker symbol.

Below is part of my personal pdf file emailed to me by penson:

EXEL *B* 06/07/2010 06/10/2010 600 3,006.00 6
EXEL *S* 11/18/2010 11/23/2010 600 3,497.94 6
EXEL had 2 trades 600 600 3,006.00 3,497.94 12 *491.94*
The first line indicates a buy of 600 EXEL shares, which debited my account $3,006.00, after a $6 commission.
The second line indicates a sell of 600 EXEL shares, which credited my account $3,497.94 after a $6 commission.
The last line indicates that there were 2 trades for EXEL in the year 2010, in which 600 shares were bought, 600 shares were sold, a $12 commission was paid, and a capital gain of $491.94 was received.
Obviously the dates are there as well, as you can see.

If you get something like this:

RY* B* 12/21/2010 12/24/2010 60 3,074.77 5.17
RY *B* 12/30/2010 01/05/2011 15 788.46 5.01
RY had 2 trades 75 0 3,863.23 0.00 10.18 *-3,863.23*

This indicates that I purchased 60 shares of RY, and then purchased another 15 shares of RY in 2010. There were no sell orders, because I sold the stock in late January. This will not be included in my Capital Gain/Loss for 2010. Due to the fact that it was sold in January of 2011, I will file my Capital Gain/Loss for my RY trades on my 2011 Tax Year.

I hope I have made this easier for you.


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## KaeJS (Sep 28, 2010)

Homerhomer said:


> In addition to what Warp already explained:
> 
> 1) you need to report everything in CAD dollars


Which exchange rate do you use for this?

If I buy 10 shares of AAPL at $350/each, and the exchange rate is 1 CAD = 1.025 USD at the time of purchase, but I sell those 10 shares of AAPL at $355/each, when the exchange rate is 1 CAD = 1.01 USD, which do I use?

Or do I use a more current exchange rate?


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## Homerhomer (Oct 18, 2010)

KaeJS said:


> Which exchange rate do you use for this?
> 
> If I buy 10 shares of AAPL at $350/each, and the exchange rate is 1 CAD = 1.025 USD at the time of purchase, but I sell those 10 shares of AAPL at $355/each, when the exchange rate is 1 CAD = 1.01 USD, which do I use?
> 
> Or do I use a more current exchange rate?


If you have Canadian trading account then use the actual amount as converted by the broker, if you have USD trading account then use the actual exchange rate for that day.

In your example if the exchange rate on the date of the purchase is 1.025 then the cost is 350*10*1.025=3587.50

proceeds 355*1.01*10=3585.50

It gives you $2 loss.


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## KaeJS (Sep 28, 2010)

^

Appreciated, Thank you.


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## GrossmanCGA (Feb 10, 2011)

It is much easier and permitted to use for all transactions the average exchange rate for the calendar year as published on the Bank of Canada website. For 2010 it is 1.02993904.

Best regards,
Eric Grossman, CGA


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## Homerhomer (Oct 18, 2010)

GrossmanCGA said:


> It is much easier and permitted to use for all transactions the average exchange rate for the calendar year as published on the Bank of Canada website. For 2010 it is 1.02993904.
> 
> Best regards,
> Eric Grossman, CGA


That's right, both methods are correct.

I prefer actual daily rates as I have them downloaded in the software, when I used excel I used annual average.


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## mrpresident (Dec 9, 2010)

*software*

Hi does anybody know of any software that Canadians can use for tracking stock transactions that can be downloaded directly to your income tax return?
kind of the equivalent to Tradelog or Quicken for Americans

thanks


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## warp (Sep 4, 2010)

Double check ANY trading summary sent to you by your broker.

Do NOT rely on it blindly.

They can and do make errors....which could cost you money.

The most common mistake I have seen is the cost base of your buys, especially if you have moved from one broker to another , or have multiple buys over a few years.


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## 50invester (Feb 10, 2010)

Much thanks to all those members who took the time and showed the patience to help someone who asked a simple question.

p.s. I'm not a plumber either, but I intend to buy a house.


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## peterk (May 16, 2010)

Warp, say, in theory, that if there were an error in a broker summary that was in your favour (i.e. reduces your cap gains) would there be any method for the tax man to detect this error (like actually going and checking the purchase prices coinciding with the purchase dates) or would this be, as the kids say, a freebie?

I've had a stock split error persist in my tfsa account which says I've lost something like 40% instead of gaining 10%. The error still hasn't been fixed and it's been a good 3 months since the split, so I suspect it never will be. Luckily this is a TFSA so I don't have to deal with the taxes anyways. But it makes me wonder what would happen if it were unregistered.


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## atrp2biz (Sep 22, 2010)

You can also use the exchange rate on the settlement day of each transaction. 

http://www.bankofcanada.ca/en/rates/exchform.html


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## Eclectic12 (Oct 20, 2010)

KaeJS said:


> Which exchange rate do you use for this?
> 
> If I buy 10 shares of AAPL at $350/each, and the exchange rate is 1 CAD = 1.025 USD at the time of purchase, but I sell those 10 shares of AAPL at $355/each, when the exchange rate is 1 CAD = 1.01 USD, which do I use?
> 
> Or do I use a more current exchange rate?


I'd use both of them, the buy exchange rate for the Adjusted Cost Base calculation and the sell exchange rate for calculating the proceeds.

Otherwise, the capital gain/loss may be reduced or inflated by the difference in the exchange rate.

At 10 shares and a difference of .015 - for this particular example it's not critical but for a larger difference with more shares, it can be significant.


At the end of the day, I prefer to pay taxes based on what I experienced.


Cheers


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## Helianthus (Oct 19, 2010)

If you have any investment income from the shares that you sold, make sure you check your past T slips for return of capital, as this will affect your cost base. I'm not sure how complicated your investment portfolio is, but I'd also be on the lookout for any spinoffs or stock splits that would also have an affect on your cost base. 

In the future, I recommend setting up a simple spreadsheet that tracks your cost base for each investment. I would also advise not to follow any broker prepared gain/loss reports. I deal with them all the time and they are often incorrect.


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## joncnca (Jul 12, 2009)

i know the OP is talking about a margin account at questrade.

does any of this apply to a TFSA account? i think, no, but any guidance is appreciated.

thanks!


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## Homerhomer (Oct 18, 2010)

For TFSA, RRSP and such you can do it for your own tracking purposes, but it doesn't get reported anywhere on the tax return.


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## Eclectic12 (Oct 20, 2010)

Homerhomer said:


> For TFSA, RRSP and such you can do it for your own tracking purposes, but it doesn't get reported anywhere on the tax return.


Yes, this is true for the TFSA and RRSP for the investments, including both capital gains and dividends.

For withdrawals, the TFSA is also not reported, where for the RRSP,the withdrawal is reported on thae withdrawal year's tax return.

[ I seem to be running into people lately who are not aware that the RRSP has a tax deferral aspect.]


Cheers


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## tania (Mar 17, 2011)

*USD investment exchange rates*



GrossmanCGA said:


> It is much easier and permitted to use for all transactions the average exchange rate for the calendar year as published on the Bank of Canada website. For 2010 it is 1.02993904.
> 
> Best regards,
> Eric Grossman, CGA


I keep all my USD investments in a USD investment account so...
At the end of the year if I make $1000 total after deductions multiply it with The average yearly rate of 1.029993904?
So I am claiming $1030.00/50% so paying capital gains on only $515 right?
Thanks for the intital tip...


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## Belguy (May 24, 2010)

Is all of this an argument for holding mutual fund units in a non registered account rather than individual equities to avoid all of these adjustment cost base headaches?

Excuse my stupidity if this is a stupid question.

When you have your taxes done by a third party, are you expected to take ALL of the slips in that you have received from your broker over the years for any stocks that you have sold in the previous year?

What if you can't find some of them?

Do the various available tax software programs out there figure all of this stuff out for you are are they useless if you have ACB's to figure out?

I think that I may be one of those investors which was referred to previously as having no business buying stocks if I don't have the smarts to do my taxes upon their sale.


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## Homerhomer (Oct 18, 2010)

Belguy said:


> Is all of this an argument for holding mutual fund units in a non registered account rather than individual equities to avoid all of these adjustment cost base headaches?
> 
> Excuse my stupidity if this is a stupid question.
> 
> ...


Actually mutual funds are usually more complicated when caclulating the ACB because of the various reinvestments, thankfully fund companies usually do a pretty good job calculating it.

For stocks, you either need to calculate the gains yourself or provide the info to third party, drip makes it a bit more time consuming. If anything is missing you should be able to contact the broker and get the info. Not a rocket science by any means and defininetely not an argument in deciding if one should invest in individual equities or baskets.


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## Belguy (May 24, 2010)

Enough of an incentive for me. I hold equity mutual funds in my open account and keep the ETF's in my registered account.


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