Mostly: Classical

[Sexton O Blake]

Re: TF - Do you have any direct experience with CCRA rulings?

Fortunately no. LOL!!

In the US if you hold the security less than a year it is taxed I believe, not as favorable (mind the fact I never use "our" and always pronounce the 26th letter of the alphabet as it was intended with "B"ee, "G"ee and "Z"ee) - as say holding MORE than a year. There of course are complications with "Federal" "State" and even "City" taxes that affect all this.

But with Canada there is no "rule" that I am aware of. The tax guide mentions things like "if it favors one or the other" e.g. I can claim my wife's dividends and/or any chartible donations in her name [technically none before our marriage]. But, here where it gets a little foggy for me, I seem to recall a court case whereby someone claimed their wife's donations and it was rejected.

Another situation. You are self-employed. Your wife "works" for you, and you pay her a salary. They do a detailed audit and find you are paying her 3x the amount that someone "in that position" would otherwise get - they would call that "income splitting" and come for you to pay the money as if it were your salary (I spoke with an accountant who told me of such a case) plus interest plus penalty.

I think there are cases where people blatantly take advantage of the system and those are the ones who are caught.

For me right now most of my trades, unforunately, are tax deferred so I don't have that much of a financial/tax headache. But if you are really serious I would:
(A) Ask others on the boards (PM) their thoughts - or pose questions on popular threads.. [I would be interested too!]

(B) Perhaps split your accounts - Long Term in one, short term in another. So that if the CCRA made a ruling against you, it would only affect ONE account, and not ALL accounts (e.g. hard to deal with an account that is mixed; so they would probably throw the book at your entire portfolio).
I ended up splitting up myself and wife's accounts because it was hard for me to keep the stuff straight.

(C) Seek professional help - an accountant or two or three who will put their comments in writing (not that helps, they are accountants which means they are all CROOKS!!!!!!; and to think those BLOODY CROOKED CGAs can vouch for me being Canadian!!! .

I question how far you could go with claiming HUGE money in captial gains and ZERO in earned income -- with the tax man.

Your better bet may be to setup a Corporation - and have it hold the investments. If you have to claim as "income" anyways, this way you could claim things like newsletters; research etc. Although the same accountant I spoke with suggested that wasn't so "as simple as it sounds". But that wasn't under the premise that investing was a full time job.

Said differently:
The tax man might not let you treat your "investments" as capital gains; but he might not let you call it "earned income" either. WIth a corporation, you pay yourself a salary, and pay tax on that - but at least it is EARNED income which allows you to put some of that money into an RSP.

Interesting.....

Anyahoo sorry. But good question.

Sexton.