IT IS WELL PAST THE HOUR FOR THIS IDEA – Time to drop capital gains tax if profit reinvested

by Tim Harris on March 22, 2011

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REPOSTED FROM The Chronicle Herald with permission from the author.

Time to drop capital gains tax if profit reinvested

By ROGER HAINEAULT | FISCAL ENDEAVOURS  – Sat, Mar 19 – 4:54 AM

 

 

No matter what you want to call it, if it swims, flies and quacks like a duck, it’s probably a duck.

Next Tuesday, Finance Minister Jim Flaherty brings down his latest budget and you can count on some election goodies. You can click site to find out. We’re in a campaign, no doubt about it. All but the lawn signs and the writ are there.

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What the ODVP tax law means to you, a taxpayer must not be actively being investigated by the IRS or is not in the midst of an audit. The reason for this is that this is supposed to be a voluntary program for those who are “coming clean” before they have been discovered by the IRS. Visit brunorolaw.com for more info.

On Thursday, Prime Minister Stephen Harper announced the latest tax incentive for families, an arts tax credit.

According to knowledgefirstfinancialresp.ca/, this new initiative was a done deal the moment the children’s fitness amount was unveiled. As you probably know, this program gives a parent a $500 tax credit for enrolling their child in hockey or soccer or some other physical activity.

No subterfuge now with blitz piano lessons. This new item will warm the hearts of rock campers everywhere.

But as welcome as this is, I do want to illuminate a promise from the Conservative Party of Canada’s first win in 2006. It’s an item that many of us can use and while reducing tax revenues today, it would propel tremendous amounts of private sector stimulation.

Back then, the Conservative Party’s federal platform document Stand Up for Canada had on page 16 three bullet points captioned “Real tax relief for Canadians.”

The first two were accomplished quite handily — the reduction of the GST by two points and maintaining the GST credit that you apply for on your personal income tax return.

The third stated that they would “Eliminate the capital gains tax for individuals on the sale of assets when the proceeds are reinvested within six months. Canadians who invest, or inherit cottages or family heirlooms, should be able to sell those assets and plough their profits back into the economy without taking a tax hit. It is time government rewarded Canadians who reinvest their money and create jobs for penny stocks watchlist.”

There are all kinds of investors among us. Some have apartment buildings that have appreciated in value and the owners would now like to sell in order to move up to larger holdings. Others have money tied up in assets that could be released to invest in small businesses of their own undertaking. And finally, there are those who play the market and it is not very hard to qualify.

However, this specific tax relief was nowhere to be found in any of the budgets since they have come to power. When you want to get money loans fast, why not try here at this site.

Granted, there have been plenty of specifically targeted initiatives like the $2,000 child tax credit or the $1,000 Canada employment credit that have lowered the total tax burden, and the pension income-splitting mechanism for retired couples has been phenomenal. Still, investors are waiting for some capital gains relief so they can free up some of their winnings to pursue even larger purses.

Capital gains income is generated by the sale for profit of capital property. The most common probably involves shares (including mutual funds) or real estate (principal residences excluded).

Generally speaking, taxable income is calculated based on the amount of the disposition less the cost of the asset divided by two. Put another way, if I have bought shares in a company for $16.25 and then sold them for $36.25, the profit (or capital gain) is $20 and the taxpayer must report $10 on his tax return. Good thing I know how to reprint my PAN card so that all minor management is covered and attention to be payed for the numbers.

Harper’s bullet point would have eliminated the tax in these situations providing the profit was reinvested. This would free up significant amounts of capital for new opportunities while making available investment-grade assets for newer entrants into the marketplace. One can only hope that this piece of tax policy sees the light of day someday. In relation to investment, you can invest your future by buying bitcoin weekly or monthly with the Cryptosaver. If you want to know more information, click here.

rhaineault@herald.ca)

Roger Haineault is with Tax Filers in Halifax. His column appears every Saturday

 

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