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Recently, I talked to a day trader and he introduced me to one of the most interesting tax strategies as a day trader
Even though I am not a day trader myself, I have digged into the numbers and figured out how this strategy can save you 80% in taxes as a day trader
I’ve compressed 4 tricks into 15 minutes and walk you through the math on how you can save $20,000 in taxes as a day trader
I also talk about how you can delay a significant portion of your taxes indefinitely in order revinest and grow through real estate as well. Make sure you watch till the end!
0:42 – 2 Basic facts about day trading
1:05 – Is it possible to reduce taxes?
1:20 – Scenario 1: You pay regular tax without a corporation
1:42 – Scenario 2: You pay tax with as a incorporated company
2:33 – Employment vs Incorporation
3:38 – How to make your corporation work for you
4:06 – How to expense your leased car in a corporation
6:22 – How to deduct your home office expense in a corporation
6:44 – How to include your business living expenses in a corporation
7:27 – Scenario 3: What if you take 50,000 as salary
8:58 – My vision on getting 30% per year
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Helpful
Hi Eric. Please post a video on trading on overseas exchanges via VPN. Thanks
I'm trying to figure out how to make this work. Some say CSV file..
I'm really trying to avoid changing my citizenship.
So after trading crypto for a year, I am now being taxed as a full-time trader. With my 2021 taxes right around the corner, can I set up this method right now and apply it to my 2021 taxes? Thank you for the great video!
Very good presentation. Thanks
If you qualify for Trader status and do m2m election and establish your trading business as sole prop… do you have to pay SE tax?
Im not in Canada but I like where you are going with this video
Awesome Video
Hi Eric thanks for the video. I already have 1 S Corp set up for my online business. Do I need to get a separate one for day trading?
Hi Eric, thx for the video! May I know if you know anyone being audited and survived from CRA, regarding reporting day-trading income as active business income once incorporated? Reason of asking is that I am about to do the same thing and came across your video, before that I consulted multiple accountants and seems to have mixed conclusion… Several of them told me that trading should not being considered as an active business and thus all the profit from CCPC will be categorized as "investment income" and subject to about 50% total tax rate.. Besides that tax interpretation bulletin, is there any source that you can find from CRA website or personal experience that this works? Really appreciate your help!
There are some questions about the day trading rule from CRA.
While CRA didn't form a strong stance on this matter. Please see this tax interpretation from a long time ago:
https://taxinterpretations.com/cra/severed-letters/2000-0030125
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Does a day trader who incorporates his business qualify for the small business deduction?
Position TAKEN:
Question of fact, but it would likely be an active business and would likely not be considered a specified investment business.
Reasons FOR POSITION TAKEN:
Frequency of transactions and period of ownership would indicate an active business. Traders and dealers in securities are generally not considered to have a business the "principal purpose" of which is to earn income from property and thus would not be a "specified investment business".
XXXXXXXXXX 2000-003012
C. Tremblay
September 14, 2000
Dear XXXXXXXXXX:
This is in reply to your letter of June 5, 2000, wherein you seek our opinion as to whether an individual who is considering incorporating his business can take advantage of the small business deduction. You state that his principal source of income is from daytrading and he trades frequently between four to ten times a day.
Our Comentários
As explained in Information Circular, 70-6R3 (copy enclosed), it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling submitted in the manner set out in that Circular. Whether a corporation can qualify for the small business deduction will depend on, among other criteria, whether it carries on an active business which is a question of fact that can only be determined after a review of the transactions of the corporation. Accordingly, it would be difficult to make such a determination on a prospective basis (see paragraph 15(j) of the Circular). However, we are prepared to offer the following general comments which may be of assistance.
The Canada Customs and Revenue Agency's position regarding income from active business and the related issues concerning a specified investment business and a personal services business is provided in Interpretation Bulletin IT-73R5 (copy enclosed). The expression "active business carried on by a corporation" is defined in subsection 125(7) of the Income Tax Act (the "Act"), and means any business carried on by the corporation other than a specified investment business or a personal services business and includes an adventure in the nature of trade.
The term "specified investment business" is defined in subsection 125(7) of the Act and generally means a business the principal purpose of which is to derive income from property, for instance, rental income or interest income, unless the corporation employs in the business throughout the year more than five-full time employees. For example, a corporation that acts as a trader in securities would generally not meet the "principal purpose" test in the definition of "specified investment business" and would be entitled to the small business deduction. In this regard, as stated in paragraph 15 of Interpretation Bulletin IT-479R (copy attached), all gains and losses on security transactions by a trader in securities are part of the normal operation of such a business. If the corporation's course of conduct indicates that in securities transactions, the corporation is disposing of securities of a similar kind and in a similar fashion as a trader or dealer in securities would and the corporation is disposing of securities in a way capable of producing gains and with that object in view, the corporation would generally be considered to be carrying on an active business and would not meet the "specified investment business" definition. Some of the factors to be considered in ascertaining whether the taxpayer's conduct indicates the carrying on of a business are listed in paragraph 11 of Interpretation Bulletin IT-479R and are as follows:
(a) frequency of transaction – a history of extensive buying and selling of securities or a quick turnover,
(b) period of ownership – securities are usually owned for only a short period of time,
(c) knowledge of the securities market – the taxpayer has some knowledge of or experience in the securities markets,
(d) security transactions form a part of the taxpayer's ordinary business,
(e) time spent- a substantial part of the taxpayer's time is spent studying the securities market and investigating potential purchases,
(f) financing – security purchases are financed primarily on margin or some form of debt,
(g) advertising – the taxpayer has advertised or otherwise made it known that he is willing to purchase securities, and
(h) in the case of shares, their nature – normally speculative in nature or of a non-dividend type.
Accordingly, it is a question of fact whether a corporation that is a daytrader in securities carries on an active business.
The above comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Canada Customs and Revenue Agency.
We trust our comments are of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
Thanks dude I am a new sub. quick question. What’s considered taxed? I asked cause I am selling weekly covered calls. Say if I make 290k in covered calls with premiums but equity value in the portfolio only went up 200k am I only taxed 200k? Or 290k and I can’t declare that loss ?
This is important information to have for people trading and doing their own investing in Canada. This is the only video that talks about the advantages and disadvantages of (day) trading as a business. Thanks Eric! Really appreciate you sharing your knowledge and skills for everyone to learn.
I know it is an old video, but hopefully someone can answer my question…If you start trading with 100k, then make 50k in realized profit, but are still carrying 50k in unrealized profit, is this a wash or do I owe tax on the 50k of realized profits?
Must be nice to live in Canada
Thanks for the video, Eric. Could one potentially create a CCPC for the sole purpose of day-trading and earning say $100,000 while also working full-time and earning $200,000. If the intent is to open the corp solely for day-trading, do I need to earn more than my day job to classify the income as active as a day-trader?
Thank you Eric for always sharing your knowledge and experience.
Is this the same in the USA?
I still haven’t found the % capital gains for stocks options trading or solely selling a stock from the stock market inside a CCPC. Can you please link me the video or at least let me know the percentage?
Hi Eric
I love your videos and experience/knowledge, could you contact to me by any way email o phone , I would like you help me out how to start investing with small amount cuz would like compound and don’t have a lot money
Please let me know how can contact you
Thanks
So people who want to trade like this (corporation) they should open corporate trading account and use that corporate trading account for trading?
Thanks Eric, and this is very good idea to save the tax. I just wonder how to get your book or training? Thanks.
Thanks Eric, for sharing this information was really interesting
Thank you for your valuable content Eric.👍
I like your videos Eric. Your videos are very interesting and informative. Thank you for sharing! Liked, Subd and Notified for a long time with you.
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