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December 13, 2019
12:53 pm
Oscar
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Winnie , you said you paid 370/oz back then so now it's over 1900. I think you would have to pay tax on half the gains. 1900 - 370 = 1530/2 =765 . So you would be paying income tax at your tax rate on 765 for every ounce you claim capital gains on. So if you dispose of and claim gains on 100 oz you would be paying 30 to 40% of 76500.00. I may be wrong on this and full gains may be taxable which would be 1530. I'm sure someone will know for sure.
One problem you could face is providing evidence of your purchase price because if you paid cash for it back then and have no proof of purchase , they may say you bought it for less and so may calculate higher capital gains amount.
Bill , half gold maples are under a grand I think .

December 13, 2019
6:01 pm
Norman1
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Winnie said

I had no idea about under $1000 no capital gains.

That's actually not true.

What happens is that, for certain kinds of capital property (personal-use property and listed personal property), there is a deemed minimum cost of $1,000 and a deemed minimum sale proceeds of $1,000.

An example of personal-use property is a bracelet. If one bought the bracelet for $100 and sells it years later for $500, then one is deemed to have bought it for $1,000 and deemed to have sold it for $1,000. $1,000 - $1,000 = $0 capital gain for tax purposes.

If, instead one had sold the bracelet for $1,200, then one would have $1,200 - $1,000 = $200 capital gain. One is still deemed to have bought it for the $1,000 minimum. But, sold it for $1,200 as the actual proceeds is above the $1,000 minimum.

Doesn't apply to capital properties that are investments or inventory.

Details are in Personal-Use Property of T4037 Capital Gains 2018.

December 13, 2019
6:02 pm
Bill
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Winnie, if you sell a gold coin for $990 you will have no capital gain to report (under $1000). And capital gains only arise on dispositions, so new buyer has no capital gain at this time.

Whether or not the new buyer ever has to pay capital gains tax will depend on her selling price at that time. Nothing to do with you.

Capital gains taxes relate to your income tax return, has zero to do with whether or not GST/HST (sales tax) applies to these transactions and that was discussed in earlier posts here.

December 13, 2019
6:21 pm
Bill
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If you buy a gold bar (not coin) for $250 and sell it for $1900 my understanding is your capital gain is $1650.

Norman1, you say that capital property that is an investment isn't LPP. That changes things from what I thought, can you provide me with the reference/definition that says that?

December 13, 2019
8:25 pm
Norman1
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Bill said

Norman1, you say that capital property that is an investment isn't LPP. That changes things from what I thought, can you provide me with the reference/definition that says that?

The best I found so far is the Tax Court of Canada case Donato v. The Queen, 2009 TCC 590.

LPP needs to be personal-use property. Judge ruled that personal-use property needs to be primarily for personal use.

The properties, the cartoon drawings, were found to be primarily for commercial use. Consequently, they were not personal-use property, as defined by the Income Tax Act. As a result, the drawings could not be LPP, even though they are included in "(a) print, etching, drawing, painting, sculpture, or other similar work of art," of the definition of LPP:

[40] The appellant submits that the donated property was personal-use property, that each property had a fair market value less than $1,000, and that the donated property was not a set. As such, it is submitted that no capital gain was realized when the property was donated by the appellant to Brock University.

[41] In determining whether the cartoons are personal-use property, the relevant inquiry is whether the cartoons were used primarily for the personal use or enjoyment of the appellant or his spouse.

[42] The conclusion that I have reached is that the property donated to Brock University in 2001 was not personal-use property of the appellant.

[43] The creation of the cartoons by the appellant was for the purpose of fulfilling his contractual commitment to Sun Media to provide a daily cartoon for use in its newspaper. This purpose is commercial rather than personal.

[44] Over the years, a few of the cartoons were subsequently used for personal purposes. These uses included: gifts to relatives or friends, the display of a few cartoons in the home, a single use by the Donatos in a trivia type game with friends in their home, and trading cartoons with other cartoonists for their work. There was very little, if any, evidence linking these uses to cartoons that were donated in 2001, and in any event the personal use was quite minor.

December 14, 2019
6:42 am
Bill
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Thanks, Norman1, but I would not see Winnie's collection of gold coins in the same light. Donato's cartoons were sold to the Toronto Sun to fulfill his commercial contract with the Sun to provide them with daily cartoons, it was his daily commercial activity/business, thus of course they were not created/acquired for personal use. Not at all parallel or even similar to Winnie's situation (unless she's an active dealer), seems to me her position would be she acquired coins for personal use, as coins are contemplated to be by the definition of LPP.

It makes sense that coins held for investment purposes might not be LPP, but I'd have to see that via the ITA definitions or CRA documents and I didn't in my cursory look so I was just wondering if you had done that.

December 14, 2019
8:20 am
Norman1
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The case is relevant. One needs to examine the purpose the item was primarily acquired or created for. If the item was not primarily acquired for personal use, then it is not personal-use property.

Personal ownership does not mean personal use. I personally own some of the shares in my portfolio and hold certificates in my name certifying ownership of those shares. But, the shares and their certificates are not personal-use property.

I didn't find a direct statement in the CRA documents. A quick search found mention of personal use and other-than-personal use in the Income Tax Act.

I also found distinctions made in the T5008 Guide between precious metals in coin form and precious metal in the form of "numismatic coins". A T5008 slip is issued when the former is sold to the dealer but not when the latter is:

The following persons have to file a T5008 information return:

  • every person in the business of buying and selling precious metals in the form of certificates, bullion, or coins who makes a payment to another person for a sale of precious metals by that other person

You do not need to file a T5008 information return for:

  • a sale of currencies or precious metals in the form of jewellery, works of art, or numismatic coins

CRA seems to make a distinction between different gold coins.

December 14, 2019
10:08 am
Winnie
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None of my gold is "numismatic coins" as far as I understand, but not sure about 1 oz Maple Leaf coin.

I need to file a T5008 information return.

December 14, 2019
11:04 am
Bill
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I agree that to be LPP it has to be acquired primarily for personal use, e.g. a numismatic coin bought as a memento. And given that Winnie has to file T5008 it appears Winnie is a dealer or trader or in the business of precious metals buying and selling. If so, are we even talking about capital gains in her case?

December 14, 2019
11:34 am
Norman1
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Do you need to file a T5008 return, Winnie?

T5008 return and T5008 slips are required of people who are "in the business of buying and selling precious metals…" But, it is not required of people who are investors in precious metals or collectors of precious metal items.

My initial impression was that you were more of an investor. Instead of investing in bank deposits and stocks, you invested your money into gold.

If you are actually running a business that buys and sells gold, then the rules are quite different, as Bill notes. The gold is then inventory and not capital property. Gains and losses on selling the gold is then business income and business losses, and not capital gains and capital losses.

A similar distinction is made between a car consumer or car collector and a car dealer.

December 14, 2019
1:18 pm
Winnie
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Bill said
... And given that Winnie has to file T5008 it appears Winnie is a dealer or trader or in the business of precious metals buying and selling. If so, are we even talking about capital gains in her case?  

Bill, I'm not a dealer, I'm not running any business at all.

I'm just regular plain investor. I simple invested my money into gold, that is it. I purchased gold legally, storing it on my property and a bit outside of my property.

And, that is important, so far I never sold any of my gold for profit, I'm only collecting gold (investing). In 1993 I sold a few ounces, but it was below the price, that I paid.

As far I understand, when I will finally sell some or all of my gold, I will need to pay capital gains tax, correct?

The only thing I would like to know, if I will be obligated to pay capital gains taxes, when, for example, I will sell it now for approx. $1900 and my purchase price for this gold was around $600 for part of it and about $1800 for another part.

Bill, Norman1, can you confirm, that I will need to pay capital gains tax after sale?
Thank you very much for your help!

December 15, 2019
7:47 am
Norman1
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As an investor, Winnie, you will have to report amount, cost, proceed, and the gain or loss from selling the gold as capital gains or capital loss in Schedule 3 of your tax return.

50% of the net capital gain for a taxation year would be added to your income for that year, as directed in line 199 of Schedule 3. Whether or not you will actually pay any tax on those gains depends on what other tax credits and deductions you have.

Under Canadian tax rules, you will calculate the capital gain/loss using the average cost of the coins, if you are selling some of the coins, or the average cost of the bars, if you are selling some of the bars.

We are not allowed to use first-in-first-out or last-in-first-out prices as taxpayers sometimes can in the US.

Lots of these details are explained in the Capital Gains Guide 2018 (T4037).

December 15, 2019
7:52 am
Bill
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Winnie, it seems you bought your gold bars and coins primarily to hold as an investment and none of the coins for personal use and enjoyment as might a coin collector. If that's the case then when you sell, either in coin form or otherwise, you will incur a capital gain, e.g. if you sell for $1900 gold that you bought for $600 then your capital gain is $1300, so $650 is added to your income that year unless Trudeau or someone else has raised the 50% taxable capital gains rate by then.

If on the other hand you sell a coin that you bought primarily for personal use and enjoyment then the $1000 rule can be used for that listed personal property coin, i.e. in the example above your capital gain would be ($1900 - $1000) $900, $450 added to your income that year.

That's my amateur understanding, I stand to be corrected.

I'm still puzzled by your comment in post #69 above about needing to file a T5008 return, I don't see that you do based on what you've said.

December 15, 2019
7:55 am
Bill
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Looks like Norman1 and I were replying at the same time, and looks like the advice is consistent. That's a good sign.

December 15, 2019
10:35 am
Winnie
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Thank you very much Norman1 and Bill!

That was exactly my understanding regarding the capital gain/loss rules.
Perfect, I'm doing everything right so far - purchased gold to hold as an investment and when I will sell it, I will report 50% of the net capital gain (I assume, that I will have gain, no loss at that time) and that gain will be added to my income for that year.

Still, one thing is a bit confusing for me. Regarding how to distinguish between coins to hold as an investment and coins for personal use and enjoyment (a coin collector).
I do keep a few om my gold 1 oz Maple Leafs on my working table all the time every day and consider them as my "playing" coins for my everyday enjoyment.

For those few coins the $1000 rule can be used (listed personal property coins), I think, but not sure.

December 15, 2019
11:31 am
Bill
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Winnie, you've got it, that's how I understand it too.

Regarding whether a particular coin is bought primarily (>50%) for investment or for personal enjoyment can be a matter of debate between CRA and you, not always clear-cut agreement. If you keep a few coins on your desk, and they are clearly secured separately from your investment gold, plus the fact 1 oz Maple Leafs are the kind that collectors normally collect, well if I was the judge I'd side with you that these ones are primarily for personal use and secondarily for investment. Also depends how aggressive you want to be when you file your return. As long as your stance is a reasonable one the downside is limited, i.e. who knows if CRA would ever reassess you, and even if they do then you'd just pay the additional taxes plus interest at that time. If you've done what a reasonable person would have done then no additional penalties would normally apply. CRA's stance would also likely be affected by how much money we're talking about- if the amounts are more substantial they'll likely be less forgiving of your personal use position.

December 15, 2019
2:07 pm
Norman1
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It would depend on the circumstances.

Kitco currently offers those 1 oz Canadian Gold Maple Leaf coins for US$1,513.70. The 1 oz Gold Royal Canadian Mint Bar is $1,508.70. Gold is US$1,476.70 per oz.

Both are less than 3% above the bullion content. That doesn't look like a collectible coin to me. That looks more like bullion in coin form.

Were those gold coins bought primarily to decorate the desk? That's the question that would need to be answered.

CRA would argue that it is more likely the coins were bought primarily for investment. Subsequently, some of the coins were taken aside for some personal use. But, the coins were primarily bought for investment use and are therefore not personal-use property.

That's what happened in the Donato case. Judge found that the cartoon drawings were primarily created for commercial/business use and not personal use or enjoyment. Some subsequent personal use of them did not make them personal use property.

December 15, 2019
2:31 pm
Winnie
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Usually about 3 gold 1 oz Maple Leafs are always on my working desk (I'm working from home), just playing with them, not a decoration.

It's better not to argue with CRA, in my opinion.
I will report sales of those 3 coins as an investment coins sales and report a bit more capital gain (I assume it will be gain, not loss).

December 16, 2019
6:15 pm
Bud
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perhaps peter wants to split this thread at the point winnie brings up her stash rename the split off thread Physical Gold

now that i got ur attention i want to add a couple more out of favour stocks to portfolio which u like any on this list:

Shawcor
Enerflex
Cameco
Inter Pipeline
Laurentian
Smart Centres
Encana
Cenovus
Canfor
Interfor
West fraser
Linamar
Martinrea
Restaurant brands
Altagas
Tourmaline

I also want to hear from those who dislike these names and why. I bought one after Bill argued against it sensing the overall negativity had maybe become overdone

December 17, 2019
10:26 am
Koogie
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I was a long time SRU.UN holder (since the Calloway days) I eventually dumped it when Huw Thomas left and because I didn't believe in their ability to execute the Vaughan project. Hopefully they prove me wrong. Either way, I made a decent gain and always enjoyed the good divvy yield.

I currently hold IPL. They won't be building any more pipelines in this country for a long time. I am of divided opinion on their petrochem project. Still, I'll continue to enjoy the yield until such time as news makes me a seller. Won't be adding to it though.

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