Personal tax accountant in Vancouver

Three kinds of investment income, three different treatments

Interest is included in income in full, which makes it the least efficiently taxed of the common investment returns. Eligible dividends from Canadian public corporations are grossed up and then reduced by a dividend tax credit, a mechanism designed to account for tax already paid at the corporate level, with the result that they are taxed more lightly than interest at most income levels. Capital gains are included at a proportion rather than in full, and only when realised. The consequence is that the same headline return produces different after-tax outcomes depending on its composition — and that which account holds which asset is a decision with a measurable value. See eligible versus non-eligible dividends.

Gross-up income is not cash income

The dividend gross-up raises taxable income above the amount actually received. That inflated figure is then used to test a range of income-tested items, so a household can find benefits reduced or clawbacks triggered by income it never had in its hands. For a retired or semi-retired owner drawing dividends alongside age-related benefits, this is the most common unpleasant surprise on a return, and it is entirely predictable in advance. It is also a reason the composition of personal income deserves attention rather than only its total.

Adjusted cost base is the taxpayer's job

The tax on a capital gain is computed from the adjusted cost base, and nobody maintains that figure on an investor's behalf with full reliability. Reinvested distributions increase it. Returns of capital reduce it. Identical securities bought at different times are averaged. Transfers between accounts and corporate reorganisations carry their own adjustments. Institutions report what they know, which is often only part of the history, and an investor who has moved between brokers frequently has a cost base nobody can reconstruct. Keeping the record contemporaneously costs almost nothing; rebuilding it at a sale costs a great deal and sometimes cannot be done at all.

Where the corporation changes the answer

An owner with a corporation has a second place to hold investments, and the rules there are deliberately different. Investment income earned inside a corporation is taxed at a high rate with a portion refundable only when dividends are paid out, and accumulating passive investment income can reduce the amount of active business income eligible for the preferential small business rate. The result is that a decision which looks purely personal — where to hold a portfolio — can change the tax paid by the operating business. That is not an argument for one answer or the other; it is an argument for the two returns being looked at by the same person. See investment income in a corporation.

Losses, and the rules that stop the obvious move

Capital losses generally offset capital gains rather than other income, can be carried back a limited number of years or forward indefinitely, and are subject to rules that deny a loss where the same or an identical property is reacquired within a defined window around the sale by the taxpayer or an affiliated person. Selling to crystallise a loss and buying straight back does not work, and the rule catches a spouse's account and a corporation the taxpayer controls. Loss planning is legitimate; it just has to respect a fairly specific set of boundaries. Where proceeds are received over time, the capital gains reserve can spread the gain.

What is covered

One Chartered Professional Accountant handles the whole file:

• Investment income reporting across all three categories
• Adjusted cost base review and gain or loss computation
• Gross-up effects on income-tested amounts
• Corporate versus personal holding review
• Loss carry-back and carry-forward planning
• T1 prepared alongside the corporate return

Remote, and there is no Vancouver office

EverStone has one office, in Abbotsford, and no Vancouver location. Engagements run entirely online — video meetings, e-signature and secure document upload — which for a return assembled from broker statements is the format that actually saves time.