RE:RE:RE:RE:capital gain for multibaggers over 5 yearsOh, ok. You could look at a staggered sale depending when your PC year end month is. Maybe one third in the month of your year end, one third in the following year (as early as the next month), and one third 12 months after that.
Or just take the hit on one year assuming you have enough shares for a $600k capital gain (150k CG tax which would claw back all the SBD room for that year). It's not a full hit because your active business income would still be taxed low at the general corporate rate which is a 20%+ tax deferral vs about 34% tax deferral for the SBD rate (Alberta rates, top bracket). Not the end of the world for one year and won't impact future net worth that much.
ManitobaCanuck wrote: Many thanks for the explanation .
My profession consulting income is around 400-450k yearly . Sitting on about 1.3mill of capital gains and not sure how to tax efficenctly book this profit and not risk my small business deduction .
riski wrote: You can still earn active income in your PC, but anything above the SBD limit (curtailed or otherwise) is taxed at the general business rate which is still pretty good - 20% less than earning income personally at the top bracket. For one year, that's not the end of the world with a significant tax deferral.
Currently the passive income limit is $50k. That would be a $200k capital gain or thereabouts. If you have a $400k capital gain, then you have $100k of CG tax. The $50k reduces your SBD for the subsequent year by $5 for every $1 over, so your SBD limit in the next tax year would be $250k instead of $500k in this example.
Are you earning more than $250k in your PC? Are you expecting a $400k capital gain? You may not have much to worry about depending on these numbers.
ManitobaCanuck wrote: Hi Forecast
Nice calcualtions .
This is worse if you have the investements through your small business corporation ,where it adds up to corporate income reducing small business deduction .
Again remember you have to pay taxes every year ,so you need to pay tax in 2022 accordingly on the capital gain and there is less capital to deploy.
forecast123 wrote: There is good chance for BTE to be a multibagger depending on your average cost base. The lowest SP of BTE was 0.335$ in Feb 2020.... The closing price last Friday was 3.76$. Say for BaystreetWolf, his target for BTE grow to 15$ by Q4 23..... If one investor purchased BTE shares @ 0.50$ in 2020 and long this investment till SP 15$. it is effectively a 30 multibagger situation.... Say hypothetically, BTE SPs over 4 years are something like the following:
- bought 1M at 0.50$ in 2020
- 3.76$ in Oct 2021
- 8$ in 2022
- 12$ in 2023
- 15$ in 2024
If he sells only once till 2024, his 30 multibagger taxable capital gain will be 1M x (15 - 0.50) x 50% which will end up in the highest tax bracket in 2024 giving the most to CRA.
If he sells and buys back each year, say sell in 2021 at 3.76$ and buying back similar price in similar timeframe , his taxable capital gain for 2021 will be 1M x (3.76 - 0.50) x 50%. Following the same sell and buyback process for 2022, his taxable capital gain for 2022 will be 1M x (8 - 3.76) x 50%.... It will be far more work splitting over 4 years and need also close monitoring of SPs to ensure buyback in similar prices within similar time period....but looks more sensible rather than waiting for 4 years for one big stock sale.