kyrojin

@ixero@20, I dug some more and found some interesting case laws around this. To be honest, I haven't read through all of them yet but some food for thought for all. https://htkacademy.com/business-income-vs-capital-gains/ https://ummattaxlaw.ca/2019/05/21/are-you-earning-capital-gains-or-income/ https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/230346/1/document.do https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/26964/index.do https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/29032/index.do

@ixero@20, to be honest, I couldn't find anything online that would point me to any definitive guideline. The best I could find is this: https://taxinterpretations.com/node/393961 The same letter states that the courts will use a combinations of the factors listed above (from IT-479R). However, it does not indicate how many in combination will be taken into consideration. As stated previously, I was advised based on my situation where I fulfill a number of the factors, I would be better served to treat my income as business income than capital gains. This may or may not apply to you. I totally agree with @Kim here. It is not the fact that the holding was a short period of time (and it is unclear what is determined to be short). But rather say for example, there were many transactions, most or all of which were short term. The funds for the transactions were obtained through financing to purchase stocks and options in equities which are speculative in nature. The complexity of the transactions (various options strategies) would then also point to thorough understanding of securities markets. For someone that was trading in circumstances in this example, it would be likely looked at as business income. If in doubt, contact the tax professionals and sort out your personal situation.

I don't disagree with you. I am providing the advice I was given on how one is to be determined if they are considered a trader or dealer in securities. For most of us, we will unlikely to be a dealer. But under certain guidelines, we may be considered a trader. Once you are considered a trader, all income is considered income and not capital gains. Your comment here made me go back and re-read the original question. Here, @ixero@20, is asking how the strategies are to be reported to CRA. In this regard, @Kim, you are absolutely correct, the strategies themselves do not matter. It is whether or not the tax payer is considered a trader or not which will determine if the reported income should be capital gains or income from business. Here @Kim, your original response is what prompted my desire to provide the advice I was given previously. In this original response, there was no additional comments or information on the determination of whether the tax payer is a trader or not. I believe we are on the same page and we have highlighted some of the details that goes into ones tax return. As always, tax is a complex subject and should be consulted with a tax professional.

Regarding the quote provided here. This is referring to the same election of form T123 which I mentioned above. Sorry, I had not read the whole PDF prior to my previous reply. In this PDF, you will note the same message as the taxtips.ca web pages. From page 2 of the PDF: From page 3 of the PDF: In the following paragraph in page 3 of the PDF: Again, the PDF refers to the election and that it is only for the proceeds on the disposition of Canadian securities. Lastly, the final paragraph of page 3 in the PDF: I would advise OP to do the same.

Correct about most people the gains and losses will be taxes as capital gains. However, further down in the same page, you there is an additional link where there is a guideline which tries to assist you in determining if your activities are to be treated as capital gains or business income. In the linked page, the list of guidelines to determine treatment of income is as follows: On the same page, you may submit Form T123 to elect all transactions as capital gains in the future. From my understanding, this is irreversible and only applicable to Canadian securities. Correct, the T5008 does not distinguish this, again this is self reporting. I believe you will be in the best position to determine if your contracts are of short or long term contracts. If an audit takes place, you may be asked to defend your position.

Each T5008 will state what type of security it is in line 15. The type code listed in line 15 will differentiate between securities such as futures, options, shares etc. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/financial-slips-summaries/return-securities-transactions-t5008/t5008-slip/completing-t5008-slip/detailed-instructions/box-15-type-code-securities.html Furthermore, during the audit you may be asked to produce the trades and securities that amounted to the values listed in lines 20 and 21. This will reveal the duration of your holdings.

This is also what I have been advised. Regarding how CRA would know, they probably would not know until you are audited. As with all of our tax returns, it is based on self assessment. If you are ever audited and found due to the short nature of the holdings, you may be reassessed for your taxes. On the topic of why you would report as income, while definitely not as advantageous of paying only on 50% of the gains, by reporting as income, you may write off items such as courses and tools that you use to earn the business income. I would strongly advise speaking with your accountant on your situation.

It’s back online for me now too.