Question

During 2017, Timothy Trader began engaging in frequent trading in Canadian securities, with the intention of making profits on sales of shares. Below is a summary of purchases and sales of shares that he made in 2018:

                                                Number            Cost              Sale price

Company                                of shares          per share            per share

Alogoma Steel                           1200               $ 8.47              $ 7.48

Bell Canada                               1500                 46.88                 55.75

Dominion Bridge                         800                 21.25                26.85

MacLean Hunter                        1900                   9.22                 11.37

Rio Algom Mines                     2300                 15.25                13.50

Slater Steel                                 1250                 10.00                   8.20

Required:

1. Explain the tax implications of the above transactions as they relate to Timothy's 2018 personal income tax return.    (Include the taxable amount of the effect!)

2. What advice would you give Timothy to help improve his tax situation?

Answer 1

given,

during 2017, timothy trader engage in trade in canadian securities.the following are the summary.

company	number of shares	cost per share($)	sale price per share($)
alogama steel	1200	8.47	7.48
bell canada	1500	46.88	55.75
dominion bridge	800	21.25	26.85
maclean hunter	1900	9.22	11.37
rio algom mines	2300	15.25	13.50
slater steel	1250	10	8.20

a) tax implication of the above transactions as they relate to timothy's 2018 personal income tax return.

- the gain and losses from the sale of securities are treated as capital gains and lossses. this means 50% of the gains are taxed instead of 100%. a capital loss can only be used to reduce or eliminate capital gains.

company	sales cost	purchase price	capital gain/loss
alogoma steel	8976 (1200*$7.48)	(10,164) (1200*$8.47)	(1188)
bell canada	83,625 (1500*$55.75)	(70,320) (1500*$46.88)	13,305
dominion bridge	21,480 (800*26.85)	(17,000) (800*21.25)	4,480
maclean hunter	21,603 (1900*11.37)	(17,518) (1900*$9.22)	4,085
rio algom mines	31,050 (2300*$13.50)	(35,075) (2300*$15.25)	(4,025)
slater steel	10,250 (1250*8.20)	(12,500) (1250*$10)	(2250)
		capital gain/loss	14,407
	50% tax on capital gains	- tax 50%	(7203.5)
		capital gain after tax	7203.5

b)advice to timorthy to help improve the tax situation.

1) use tax advantage accounts.

2)engage in tax loss harvesting.

3)donate asset to charity.

4)carry over losses to the next year.