[kirabee]

I was wondering if someone could comment on a concern of mine.

Last year, like for many, a wickedly horrid year for my stock portfolio. Being a new trader in the market I was stupidly trying to trade a commodity ETF through the downturn all summer, losing more and more money. In the depths of the crash, I doubled the money in my trading account, said a prayer and left it alone. By December I had made back all of my money, plus a small (few thousand $) profit.

I have yet to submit my tax return for this year because of one fear. I am wondering due to the frequency of the trading will the CRA basically ignore most of my losses, and consider my Hail Mary play entirely taxable? After reading the some info on taxable capital gains, I think I read something on buying back the same security after 30 days to be able to apply the loss, after which I almost fainted. I can’t imagine anything worse than going through that hell for a half a year, and then having to pay income tax on $50K (the amount I made which only broke me back to even).

Am I fretting over nothing? Would CRA have mercy here? I’m too scared to find out.

[JohnNP]

kirabee, on Oct 9 2009, 01:13 PM, said:

I was wondering if someone could comment on a concern of mine.

Last year, like for many, a wickedly horrid year for my stock portfolio. Being a new trader in the market I was stupidly trying to trade a commodity ETF through the downturn all summer, losing more and more money. In the depths of the crash, I doubled the money in my trading account, said a prayer and left it alone. By December I had made back all of my money, plus a small (few thousand $) profit.

I have yet to submit my tax return for this year because of one fear. I am wondering due to the frequency of the trading will the CRA basically ignore most of my losses, and consider my Hail Mary play entirely taxable? After reading the some info on taxable capital gains, I think I read something on buying back the same security after 30 days to be able to apply the loss, after which I almost fainted. I can’t imagine anything worse than going through that hell for a half a year, and then having to pay income tax on $50K (the amount I made which only broke me back to even).

Am I fretting over nothing? Would CRA have mercy here? I’m too scared to find out.

market trader/dealer
superficial losses
taxable capital gains

if you are comfortable with your knowledge of the income tax act, particularly the approximately 20 sections following S38, then you should prepare and submit your tax return on that basis as soon as possible, assuming you are not required to submit on the basis of S9

if you are not comfortable that you are fully conversant with those sections, then you should submit all your information to your accountant as soon as possible so that your tax return can be prepared properly as soon as possible


no such thing as "mercy", there is just the exact wording of the income tax act, which CRA are obliged to ensure that everybody follows, willingly or not

[GuyL]

Lets just say that no matter how long you wait, the result will still be the same. the rules don't get "softer" over time...

[kirabee]

Thanks for your prompt reply.

I have just been checking the income tax law subsections and really don't know where to start.

I have used tax software to do the calculations re: my income tax and stock trades.
I have entered in my transactions into the appropriate form, and combined with my general income, I will get a very small refund.

I'm just wondering if there are any flags that CRA will be checking for that my income tax form will scream out.
I can guess the one flag would be total value of $ transactions (an order of magnitude greater than my salary). My profit is so pathetic relative to the total I should get some award for worst trader. I just want fly low under the radar and put last year behind me. I have nothing to hide, I just don't want to get dragged into an audit over my efforts to stop the $ hemoraging of my trading account.

[JohnNP]

kirabee, on Oct 9 2009, 03:10 PM, said:

Thanks for your prompt reply.

I have just been checking the income tax law subsections and really don't know where to start.

I have used tax software to do the calculations re: my income tax and stock trades.
I have entered in my transactions into the appropriate form, and combined with my general income, I will get a very small refund.

I'm just wondering if there are any flags that CRA will be checking for that my income tax form will scream out.
I can guess the one flag would be total value of $ transactions (an order of magnitude greater than my salary). My profit is so pathetic relative to the total I should get some award for worst trader. I just want fly low under the radar and put last year behind me. I have nothing to hide, I just don't want to get dragged into an audit over my efforts to stop the $ hemoraging of my trading account.

have you obtained a copy of the income tax act and read all those income tax act sections in the brief time between postings?
- doesnt seem likely


im not sure that you will find anybody here who would encourage a person to break the law by accidentally or on purpose contravening the income tax act accidentally or on purpose
every taxpayer is required by law to do it properly, or have it done properly by somebody who knows how
CRA organizes volunteer clinics for preparing simple returns for those who cannot afford to have it done properly

as everybody (including CRA) knows, it is just as easily possible to get correct, incorrect, or fraudulent results by a variety of methods: pencil/paper/forms/calculator/software

for the future, if you have concerns about stock trading for 2009, 2010 etc, perhaps more regular communication with your accountant would assist

[kirabee]

Thanks for directing me where to look. I shall check into it ASAP.

Like yourself, I am a law abiding professional, and am not asking for anything other than straight advice, which you have graciously provided.

Thanks for taking the time to post, and have a good Thanksgiving weekend.

[GuyL]

No matter how "unusual" your transactions may look, if that is the reality and you have the appropriate documentation to back it up, then you don't have anything to worry about.