Tax Question

[LoveBaby]

I have an indian friend back to India at the beginning of this year. However, he still has not filed his income tax yet. He asked me to do it for him. I could not reject him as he helped me a lot in work when he was here. However, I have some headache about his large amounts of stock tradings. Quite a few are "short sell", which means selling a stock before buying/covering it. Usually, doing short sell is to bet down of the market. For example, one might short 100 shares of MSFT at 60. If MSFT goes down to 50, then one could cover it to gain 100 x (60 - 50) = $1000. On the other hand, if MSFT goes up to 70, then one covers it. Then one will lose $1000. It is just opposite of long which is buy and then sell. The problem is that the paper shows that one get $6000 when one shorts MSFT. If one does not cover at the end of the year. Should one report this $6000. Anyone has such experience, please share with me. Thanks!

 

[闲得慌]

I do some half shorts and half long.

You do not need to report the "gain" as income unless you bought back to cover your shorts.

 

[LoveBaby]

Thanks for your sharing! Could you also give some comments on Form T5008. My friend has a large amount in "Proceeds of disposition" section but it does not show any cost. It does not make sense for me to use this, otherwise he should have huge tax liability which is not the case at all. His broker is Interactive Direct Canada (IB Canada). Thanks again!

 

[加猫]

最初由 LoveBaby 发布
Thanks for your sharing! Could you also give some comments on Form T5008. My friend has a large amount in "Proceeds of disposition" section but it does not show any cost. It does not make sense for me to use this, otherwise he should have huge tax liability which is not the case at all. His broker is Interactive Direct Canada (IB Canada). Thanks again!

technically, the capital gain/loss of stock trading should be calculated with moving average basis and you should find out the historical costs he purchased the stocks then work out the net gain/loss by comparing the original cost with proceed. therefore, this requires the previous years' annual trading summary, unless all his stocks were purchased in last year.

 

[LoveBaby]

Believe or not, I went to the Revenue of Canada at 333 West Laurier street this afternoon for tax question. The representative did not hear about "short sell" before. So I did not get anything but to be told to figure out by myself. Thus, I have to ask help from here. What about the dividend paid out for short sell. How to report this loss? Thanks for your sharing!

 

[行者]

Go and get an acountant to help you, or buy QuickTax software.
That's the eaist solution for you, otherwise your responsibility is too heavy.