# T5008 form questions



## Mike32110 (Oct 4, 2011)

Okay. So for years I had all of my investment income in RRSPs and TFSA's which made me not think about trades as much when it came to the end of the year. However, I started upping my non-registered account late 2014, and increased it significantly in May 2015 after I sold my house, and put the proceeds into my non-registered account. I invested in a much higher frequency than normal with respect to number of trades, however, it was more so due to a different strategy (before I would usually just buy all at once, etc.; last year I took to the habit of slowly building positions. I invested mostly in the oil/gas sector, and it wasn't uncommon for me to make a relatively large number of buy and sell transactions with the same security due to the volatility that these companies faced last year. For several years, I made almost no trades since buying a bunch of stocks in 2010, and anything was capitalized; now, as per the CRA, it seems I meet the criteria for income due to the high frequency and turnover trading that was characteristic of 2015, however, I also made the first loss in a long time, and I chose to declare it as capital as to not raise any red flags with the CRA (my income was low this year with me being in school for much of the year, so the advantages are minimal), and elect to make all current and future transactions as capital gains. I also made a large number of short sales in 2015, however, they were always in the context of a hedge (I would own oil companies I considered undervalued and short ones I saw as overvalued, however, they were different securities). Despite the argument that I would likely meet criteria for income, my understanding is that this would be a guaranteed audit, and I just don't want to deal with the stress, and after reading for literally hours, it seems that this is what the majority of people are doing in light of the incredibly ambiguous CRA laws, especially when declaring a loss. 2016 will not be the same as 2015, and my trading volume will be much lower, and should easily be in the category of a capital account. I should also mention that I have had this account since 2009 or 2010, and I have never once withdrawn any income; I have only added (which is why I do resent the possibility that I could be considered taxed on income). I only put money in my non-registered accounts since my TFSA is full, and it wouldn't make sense for me to add to RRSP's in a year where I only worked PT and went to school. So I am just looking for any additional advice on my case; would you do what I do and play it safe and keep it as a capital gain? Additional Info: I work as a Registered Nurse, however, the courses I took in school were in accounting/finance. Ultimately, they say that intent is the most important factor; given that I have never withdrawn money, and do not plan to until I am pre-retired (the age in which I am hopefully actually retired, but not 'legally' retired as per the CRA due to age). 

I also was reading that the CRA could tax your TFSA if they believe you are using it for income. Just to clarify, since I do tend to have a higher frequency of trades than most for my TFSA, could this possibly be taxed as well? Despite the fact that I had never withdrawn anything out of it before? I thought about using my TFSA to take over my non-registered as my more active account, however, I don't want to get into trouble by doing this. I also read that it would not be a problem to use more active trading in an RRSP or LIRA direct investing account, which I am a little confused about.

Finally, the biggest problem i have relates to actually entering the transactions. I have a 35 page trading summary from Questrade, however, the number of trades is actually really deceiving. It was not uncommon, for example, for me to sell say 4,000 shares of something, only to have the transaction go through in as many as like 10-15 individual transactions! This was especially true when I was buying larger quantities of smaller companies. Therefore I started to enter them manually, and after hitting 30, I couldn't add anymore through turbotax; I read that they require you to aggregate the securities, and even after doing all of these calculations, I won't have enough since I disposed of more than 30 securities in 2015. Just wondering how can I proceed to report my T5008 accurately when I don't have enough forms? Is there any other software that I could use? I am trynig to avoid this because the T5008's are my last item to do, and I already spent quite a bit of time on my other items. Any help at all would be greatly appreciated; I've already read the CRA's documents, and am just looking for some more clarity. Thanks!


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## Eclectic12 (Oct 20, 2010)

Wow ... the block of text makes it hard to see the details for each question ... maybe breaking it out into say three questions might help?

Starting with what I think are the simple, quick questions to answer ...

Re: Could my TFSA be taxed simply on frequency of trades?
I don't believe so. The articles I have read say there is a set for criteria for CRA to come after the tax payer. One of the top factors seems to be having a large FMV in your TFSA. Other factors include but are not limited to knowledge of securities markets and trading experience.
http://business.financialpost.com/p...-the-taxman-wants-to-know-how?__lsa=17bc-1a01

Having a FMV TFSA that is not overly large likely means there would be no issue.


Re: Would you keep it as a capital gain?

My understanding is that where one does not meet the criteria, one can report the investment sale as a capital gain at the better tax rates. Where one does meet the criteria, one can make the election (assuming one does not fit those excluded from making the election).

Once made, the election is permanent. Where the election has been filed, I believe it can't be changed (unless CRA determines the election was not available to the tax payer).
http://www.taxtips.ca/personaltax/investing/taxtreatment/capitalorincome.htm


Re: Turbo tax limits the lines to 30, I can't enter the right number of transactions

First question is are you adding transactions you don't need to?
The T5008 annual trading summary shows all buys/sells for the year. What has to be entered onto Schedule 3 "Capital Gains (or Losses) in 2015", Part 3 "Publically Traded Shares, Mutual Fund Units ..." from the T5008 is the total for the year.

For example, one year I bought 200 stock A shares, bought 400 more stock A then sold 100 of stock A, sold 100 and sold a final 100 shares. I sold a total of 300 stock A shares so despite five lines on the T5008 and two sale lines - only one line for the total was needed on Schedule 3.


The second suggestion is contact Turbo Tax Support to find out how many lines you can add to Schedule 3, Part 3. I use uFile where there is a push button that allows me to add lines as I need. I have yet to need thirty lines so I can't be sure it will let me add that many but I have added as many as eighteen.


StudioTax is also available so if Turbo Tax says they have a limit too small, you can try the link I will attach. As it is software, I would think Turbo Tax would allow one to add a lot of lines but as I don't use it, I don't know. Maybe a Turbo Tax user can comment.
http://www.studiotax.com/en/?page=1


Cheers


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## Eclectic12 (Oct 20, 2010)

Re: What to do for too many transaction lines?

The software will determine what is possible. If the software can't handle the number needed, then switching to another software that can is one way to go.

If this were a paper return, I have added an extra sheet (with a note to point to the sheet) in the past. Now with software, I have been able to add as many as I have needed.





Mike32110 said:


> ... I also was reading that the CRA could tax your TFSA if they believe you are using it for income ..


I have used my TFSA for income (to pay off the mortgage early) so I'd be interested in your source. As I say in post #2, so far - the times I have read of people being taxed is where the TFSA value is so large that CRA figures it must be a business.

There are those who were violating the intent of the TFSA in 2009 though intentionally over contributing or using RRSP to TFSA transfer but what you have written does not sound anything like this.


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> For example, one year I bought 200 stock A shares, bought 400 more stock A then sold 100 of stock A, sold 100 and sold a final 100 shares. I sold a total of 300 stock A shares so despite five lines on the T5008 and two sale lines - only one line for the total was needed on Schedule 3.


Yes, with one caveat. Beware of any superficial losses.


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## Eclectic12 (Oct 20, 2010)

True ... if any of the taxable account stocks are also held in a registered account, losses are not allowed when the stock was sold. 
http://www.taxtips.ca/personaltax/investing/taxtreatment/shares.htm


Too busy with the basics as well as the long text is my excuse ... :biggrin:


Cheers


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## kcowan (Jul 1, 2010)

I think you need to forget about the T slips and submit a Sched 3 that accounts for all your activity. Do not include any TFSA activity and also include a note of explanation that you are a nurse and this year was an exception for blah blah.


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## Eclectic12 (Oct 20, 2010)

^^^^

It was recently pointed out that the annual trading summary received from a lot of brokers is marked as a "T5008". Where one skips the T forms, one presumably would also skip the annual trading summary. 

How is the OP going to find all the security sales during the year to know what needs to be reported on Schedule 3, Part 3 for the CG or CL?

Or are you suggesting the OP go by their monthly statements, one month at a time or by collecting all of one's sell slips (if one kept them - most investors I know don't keep them beyond a month or two)?


This seems like a lot of work versus using the annual trading summary (aka T5008) to get the list of sell transactions for the tax year. The OP can then do the calculations to consolidate them into one line item per security reported on Schedule 3, Part 3. 

Where the transactions are consolidated to a single line, the OP should keep the detailed calculations. If audited or asked for more info, the details can be easily provided (I use a worksheet on a spreadsheet that can easily be printed out).


Cheers


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## AltaRed (Jun 8, 2009)

I still see the T5008 (or the equivalent Annual Trading Summary) as the source for much of the Schedule 3 data, especially sales data. It is incumbent on the investor to have all the acquisition data (e.g. prior year T5008s from the brokerage). Whether that is the CRA online one or the brokerage one is up to the user. I know Scotia iTrade has a .csv option (data dump) of that kind of information.

In my case, I have kept a copy of every Annual Trading Summary/T5008 for 'decades'. It is the only Schedule 3 relevant document one really needs to keep (confirmation slips are not needed IF one has all the Annual Trading Summarys/T5008s)


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## agent99 (Sep 11, 2013)

kcowan said:


> I think you need to forget about the T slips and submit a Sched 3 that accounts for all your activity. Do not include any TFSA activity and also include a note of explanation that you are a nurse and this year was an exception for blah blah.


Good advice. I have never used a T5008. I use the ones sent to me just to cross check against my own records, then enter the transactions directly into Schedule 3.


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## Mike32110 (Oct 4, 2011)

Eclectic12 said:


> Wow ... the block of text makes it hard to see the details for each question ... maybe breaking it out into say three questions might help?
> 
> Starting with what I think are the simple, quick questions to answer ...
> 
> ...


Thanks for the helpful advice; I apologize for the longwinded questions. 
Having a FMV TFSA that is not overly large likely means there would be no issue. I was reading that if there is evidence of it being used for income then they could tax you, but this was a minor concern for me. I plan on reporting nothing with my TFSA, which is my understanding. 

Regarding the capital gains/investment, it seems that technically I am a trader for 2015, yet this year was an anomally for me; I just know what a huge red flag it would be after several years of capital gain profits, and then a year of losses declared as income, followed by another year of profit (hopefully) and capital gains. My plan is to make the deceleration and not risk it, especially since my income was low this year, the benefits are minimal as my marginal tax rate is extremely low for 2015. 

I was told by Turbotax that the limit is actually by netfile; they said do 30 on the software, and then do schedule 3's for the rest.

Regarding the summarizing everything into one form, I just want to make sure I am clear (otherwise I just wasted a significant amount of time). My understanding is that you can summarize everything into one form for each security, but not for the entire summary of all of my securities? What I did was for my securities with only 1 disposition (or a group of dispositions at the same time), I did a single entry; for my securities where I bought and sold throughout the year, but disposed of the entire security all at once before rebuying, I simply summarized by debits and credits); for the more complicated ones where I was building positions and selling part, but not all, I calculated adjusted cost base using this website, adjustedcostbase.com; I then exported the data to CSV in excell, used formulas to add up all my ACB and dispositions together, to produce my summary ACB and disposition. The latter case took about 95% of my time, while the rest were quite easy to do. I checked my math and it seems to be correct. Does this make sense? I sold about 40 securities total, so my plan is to print 10 schedule 3's, print of my entire tax return, and send it via mail. 

Just making sure this is all clear. Thanks for the helpful information everyone.


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## Mike32110 (Oct 4, 2011)

Also one last question: Regarding USD exchange rates, my understanding is that due to the number of trades, I have to convert every single number into CAD using the exchange rate OF THAT DAY. The question that I cannot seem to find is what exchange rate do I use for the day? I am assuming the close versus the noon rate, but I am not sure on this. It would be much easier of course to use an average rate, but I don't think it is fair considering the large number of deals I made, and the huge volatility in the USD/CAD; especially since my trading strategy involved the USD/CAD significantly. Thanks!


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## james4beach (Nov 15, 2012)

Mike, you have two choices. Use the real time rate, or you can use the published average exchange rate for the year as published by Bank of Canada. But make sure you are consistent. Most of us will use this average rate, _for everything_.

The average rate in 2015 was 1.2787108

Make sure you do it in the correct direction! 100 USD = 127.87 CAD


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## AltaRed (Jun 8, 2009)

james4beach said:


> Mike, you have two choices. Use the real time rate, or you can use the published average exchange rate for the year as published by Bank of Canada. But make sure you are consistent. Most of us will use this average rate, _for everything_.
> 
> The average rate in 2015 was 1.2787108
> 
> Make sure you do it in the correct direction! 100 USD = 127.87 CAD


Buys and sells are done at the Noon exchange rate on the date of settlement of the buy, or sell, as applicable, at least for those of us using the capital gains (not income) method. It is only the income streams, i.e. dividends et al that are converted at the annual average exchange rate. This is very clear in CRA documentation.

http://www.cra-arc.gc.ca/E/pub/tg/t4037/t4037-e.html

Added: I have used Closing exchange rates since that is often easier to access. Bank of Canada recently announced they would soon drop noon rates and use closing day rates only. Also, a lot of people tend to use Transaction Date for the date of forex conversion rather than Settlement Date and that is what I historically did.....and continue to do. It really does not matter as long as one method is used consistently forever. The theory about using Noon rate on the Settlement Date is because the larger institutions do not move cash/convert cash until 'the last minute' meaning about mid-day on Settlement Date. For a retail investor, the decision to buy/sell is made on Transaction Date.....and typically has the money on hand anyway. Hence why many retail investors use Transaction Date forex. As mentioned, CRA has not objected provided it is consistent.


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## james4beach (Nov 15, 2012)

Wait - I thought we could use the average exchange rate for the year, if for example there are many buys & sells throughout the year. For example I have maybe 10 positions to report for the year as capital gains/losses, a mix of different securities.

http://www.cra-arc.gc.ca/tx/ndvdls/...tng-ncm/lns101-170/127/clc-rprt/menu-eng.html



> Report your gains or losses in Canadian dollars. Use the exchange rate that was in effect on the day of the transaction *or, if there were transactions at various times throughout the year, you can use the average annual exchange rate*.


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## AltaRed (Jun 8, 2009)

I believe that is for frequent buys and sells in one security where some people buy/sell many times in a year around a trading range. But I am not a tax expert. 

I use this "NOTE" from the same link


> When calculating the capital gain or loss on the sale of capital property that was made in a foreign currency:
> 
> convert the proceeds of disposition to Canadian dollars using the exchange rate in effect at the time of the sale;
> convert the adjusted cost base of the property to Canadian dollars using the exchange rate in effect at the time the property was acquired; and
> convert the outlays and expenses to Canadian dollars using the exchange rate in effect at the time they were incurred


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## Numbersman61 (Jan 26, 2015)

It is my understanding that for buys and sells you have to use the exchange rate at transaction date. Average annual rate cannot be used.


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## Eclectic12 (Oct 20, 2010)

Mike32110 said:


> Thanks for the helpful advice; I apologize for the longwinded questions.


Just indicating it is making it tougher to figure the details as well as be clear on the question.



Mike32110 said:


> ... I was reading that if there is evidence of it being used for income then they could tax you, but this was a minor concern for me. I plan on reporting nothing with my TFSA, which is my understanding.


The only articles I have seen where people have run into issues are moves that violate the rules or the value has gone up tremendously. If you have a chance to post a source, I'd be interested as a lot of the descriptions as well as CRA's web site say withdrawals are tax free. 

As I say, I pulled out thousands from my TFSA to pay down my mortgage early without an issue over three years. So I don't seen how withdrawing thousands to pay for rent, heat, light or a car would make a difference. Sitting it in the bank for a while earning income, would mean the income it produces would have to reported (or investing in a taxable account into securities though).




Mike32110 said:


> ... I just know what a huge red flag it would be after several years of capital gain profits, and then a year of losses declared as income, followed by another year of profit (hopefully) and capital gains.


Do you fit any of the other criteria from the tax tips article?

I haven't done anywhere near the number of buys/sells in a year but I have had CG income for multiple years, a couple of years of CLs and then back to CG's with no audit's yet.




Mike32110 said:


> ... I was told by Turbotax that the limit is actually by netfile; they said do 30 on the software, and then do schedule 3's for the rest.


I don't understand this advice ... if there's more than 30 securities involved, where netfile has a limit of 30 - I would think netfile is not an option. One would put the 30+ securities into Schedule 3, part 3 but one would print a paper return and mail it off. 

The wording makes it sound like netfile is possible for the first 30 then paper can be used for the rest.

Where you are not eligible to netfile, one has to submit a paper return. I would think CRA doesn't want to deal with part netfile and part paper so if part of the process is paper, I think this locks you into submitting a paper return for everything. If I am correct, this also means that all the things that are not required by a netfile return but are for a paper return would have to be included.

Cheers


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## Eclectic12 (Oct 20, 2010)

I originally had this as part of the first post but I think it needs to be separate to keep things clear.




Mike32110 said:


> ... Regarding the summarizing everything into one form, I just want to make sure I am clear ... Does this make sense? I sold about 40 securities total, so my plan is to print 10 schedule 3's, print of my entire tax return, and send it via mail.


No ... there will only be one Schedule 3 for your return (assuming this limit bit is true) when you print your tax return. On that schedule 3, if all the securities are publicly traded, the sales will all be reported on part 3.


Instead of ten Schedule 3 forms (where the software stops adding line items for part 3 at 30), I'd look into creating two bogus returns so that between the two bogus returns, one can hopefully print just the two Schedule 3 forms. This would give 60 detail lines for Part 3, which sounds like more than enough. 

The totals on your real return will look out of whack so I'd then plug into the real return the totals from each of the other two Schedule 3 forms (i.e. the return only has two Schedule 3, part 3 line items). This should mean the two subtotal numbers get transferred correctly to your real return on other T1 areas so that the grand totals are fine. You can then attach a note as well as the two additional Schedule 3 forms when assembling the paper pages so the CRA rep going through the paper forms can easily understand what you did. The advantage is that the software will use the correct numbers/math for your return, without so many Schedule 3 forms.


Worst case, if the bogus returns won't let you print just the Schedule 3 form ... you might be able to print to a PDF directly (uFile allows this) where you can print from the PDF just the page(s) you need. Or there are a lot of printer drivers that can be downloaded and installed so that when selected for the three returns, three PDFs will be produced. You then selectively print the additional two Schedule 3 forms and the full real return.


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## Mike32110 (Oct 4, 2011)

Just a bit of an update: I seem to be able to add extra entries under "capital gains", a different section that the "t5008" entry section; all of the necessary information is there, so I am actually going to just complete the remainder of transactions under this section (hopefully before reaching a limit). My understanding is that inputting the T5008 data in the different sections gets past the limit, while also having the same effect. 


I do, however, have a more recent issue. How do I deal with an open short position?

For my closed short positions, I ultimately treated it the same as a long position in the calculations, and this wasn't an issue as my shares balanced in my trading summary report. However, when I got to my open short position, my assumption is that I would not add the last short trade that I made (which hasn't been covered yet); Therefore, treating it the same as an unfilled buy order. 

By the way, I meant to say in my previous post that I was told to PRINT my return (with the 30 T5008's) on the return, then add the rest of the schedule 3's by mail. They never told me to do half and half, as that would sound extremely difficult to deal with. 
Thanks for your helpful advice!


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## Eclectic12 (Oct 20, 2010)

Mike32110 said:


> Just a bit of an update: I seem to be able to add extra entries under "capital gains", a different section that the "t5008" entry section; all of the necessary information is there, so I am actually going to just complete the remainder of transactions under this section (hopefully before reaching a limit). My understanding is that inputting the T5008 data in the different sections gets past the limit, while also having the same effect.


What section and/or line is it?

If you mean somewhere on Schedule 3, I only see Section 1 "Qualified Small Business Shares" that has similar columns. I expect using it would be at best, slow down your return as it explicitly says publicly traded shares should go into section 3.



The too, I should have you confirm that the election you say you are going to make.

If it is to be a trader who has to report their CG as income then I don't believe Schedule 3 is the right place to be reporting the stocks as the bottom of schedule 3 (line 199) will cut the total CG down by 50% to record the taxable CG.

If you are electing for the transactions to be treated as a regular CG, then Schedule 3 is fine. (If you go with the bogus return method I suggested to generate the two detailed Schedule 3 forms ... make sure that the Schedule 3 form on your return reports on line 132 the full CG so that line 199 can properly reduce the total by 50%. If you use the line 199 numbers from the other two Schedule 3 forms, then the 50% reduction will happen twice, which I am sure CRA will catch.




Mike32110 said:


> I do, however, have a more recent issue. How do I deal with an open short position?


Maybe someone with experience can comment as I have not done this.




Mike32110 said:


> By the way, I meant to say in my previous post that I was told to PRINT my return (with the 30 T5008's) on the return, then add the rest of the schedule 3's by mail. They never told me to do half and half, as that would sound extremely difficult to deal with ...


I'll have to check in the software I use. 

As I say, as I am reporting as a run of the mill investor - I use a combination of my one T5008 and my bookkeeping spreadsheet to put as many Schedule 3, Part 3 entries as I need. If the one T5008 shows that there are seven stocks sold during the tax year, I input to Part 3 the line that is already there then six more lines, one at a time - filling out the info specific to that security.

Even back in the old days before Netfile, the only item printed/sent as part of the tax return was Schedule 3. 

My T5008 stays at home, available should there be followup questions or an audit. I never filled out a "T5008" or mailed one in as part of a tax return. So I am not following where the 30 T5008's that are said to be part of the return are coming from.


Regardless, one of the things to watch for is how the paper T5008 info is properly added into the software calculations. 

Hopefully the helpdesk people warned you to make sure there is method for what is on the separate forms to be included into the electronic forms. Otherwise, the return is going to be slowed down as the totals figuring out a refund or owning will need CRA to add in the numbers from the additional paper forms.


Cheers


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## james4beach (Nov 15, 2012)

Numbersman61 said:


> It is my understanding that for buys and sells you have to use the exchange rate at transaction date. Average annual rate cannot be used.


Thanks for educating me about this. I looked it up and agree... cap gain/loss on foreign stocks should be evaluated at the exchange rate at the time of the buy/sell.

Good news I guess, my capital gains are reduced by this.


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