Personal Finance

How many trades a year when CRA considers you are a "business"?

  • Last Updated:
  • Jun 22nd, 2018 9:51 am
[OP]
Deal Addict
Oct 7, 2011
1099 posts
419 upvotes
Toronto

How many trades a year when CRA considers you are a "business"?

For people trading frequently in a personal margin account in a discount broker, how many trades a year would CRA consider you as a business? That is, if treating you differently for tax purpose.

Would it be twice that number (of trades) for a couple's joint account?

Thanks.
7 replies
Deal Guru
User avatar
Jun 26, 2005
10096 posts
1954 upvotes
Toronto
1) phone CRA to ask, they will tell you


I phoned a few years ago and asked. That guy was super nice and spoke with me for like 30min, maybe he was bored.

From what I heard, it isn't about quantity as much as the below items:

Summary:

- if you don't have a pay check from work, and only income comes from trading, that makes you more likely to be a business to CRA

- if you ever shorted a stock, even ONCE, if CRA audits ya, you will be considered a business. I kept my mouth shut at that point hehe

- you cannot switch back and forth between Personal vs. business in treatment of your taxable stock gains. Once you declare you are doing this as business, CRA will not like it if you then say "this is now for personal and I claim the 50% taxable only rule"
Deal Guru
User avatar
Jun 26, 2005
10096 posts
1954 upvotes
Toronto
Here's a side tip. I've been to a real trading school (Online Trading Academy) and it is not about quantity, it is about quality.

I started trading 10+ years ago, in the first few years, my summary of trades to CRA was like 70 rows of excel.

Last year, I had 10 trades. The net profit was almost double of what that 70 rows was.

If you continue to get better, take less risks (eg. no penny stocks, etc) you will ONLY take really really high quality trades.

Because its a high quality setup, instead of 10 shares, you put in 50 shares. The market doesn't care if you buy 10, 100 or 1000 shares.
Yesterday, I exited my QQQ options trade, in 1.5 days of trading, my net profit was $1200 USD. 22% gains. now I wait again for the markets to come into my zones. As they taught us, its called "waiting", not "trading"

Be like a lion. Don't waste time chasing rabbits, let the rabbit come within your area, then POUNCE on it (100 shares instead of 10)

So your original question will no longer be an issue.
Last edited by rfdrfd on Jun 21st, 2018 11:03 pm, edited 1 time in total.
Sr. Member
Nov 17, 2014
807 posts
281 upvotes
CRA does not look at # trades alone to determine whether u are in business (100% taxable) or for long term investment (half taxable). Other factors include:
a) your primary intention of buying a particular property: quick sale vs long term investment
b) you profession: Is your day time job a stock broker (for stocks), or developer (for real estate)?
c) # transactions: day traders vs long term investor, etc, etc.
[OP]
Deal Addict
Oct 7, 2011
1099 posts
419 upvotes
Toronto
Does age matter, i.e. for people in retirement age? No other income but just from investment (and CPP/OAS, or registered account withdrawls).
Sr. Member
Nov 17, 2014
807 posts
281 upvotes
Cavegirl wrote: Does age matter, i.e. for people in retirement age? No other income but just from investment (and CPP/OAS, or registered account withdrawls).
Age, retirement and income sources are not factors in determining whether a taxpayer is trading (in business) or investing.
Member
May 13, 2015
256 posts
254 upvotes
Manotick, ON
rfdrfd wrote:
I started trading 10+ years ago, in the first few years, my summary of trades to CRA was like 70 rows of excel.

Yesterday, I exited my QQQ options trade, in 1.5 days of trading, my net profit was $1200 USD. 22% gains.
After 10 years of trading, I would be certain you are dealing with at least hundreds of thousands if not millions...

1. S&P500 returned almost 16%-18% CAGR for the last 10 years.

2. I assume you are day trading to beat the index. Otherwise, you might as well have just bought the index. So let's assume you return 20% CAGR for the last 10 years. (Beating the index)

3. Back of the envelop math shows if you saved $10,000 per year to day trade @ 20% returns:

2009 $10,000.00
2010 $22,000.00
2011 $36,400.00
2012 $53,680.00
2013 $74,416.00
2014 $99,299.20
2015 $129,159.04
2016 $164,990.85
2017 $207,989.02
2018 $259,586.82
Deal Guru
Feb 9, 2009
12372 posts
11282 upvotes
rfdrfd wrote: 1) phone CRA to ask, they will tell you


I phoned a few years ago and asked. That guy was super nice and spoke with me for like 30min, maybe he was bored.

From what I heard, it isn't about quantity as much as the below items:

Summary:

- if you don't have a pay check from work, and only income comes from trading, that makes you more likely to be a business to CRA

- if you ever shorted a stock, even ONCE, if CRA audits ya, you will be considered a business. I kept my mouth shut at that point hehe

- you cannot switch back and forth between Personal vs. business in treatment of your taxable stock gains. Once you declare you are doing this as business, CRA will not like it if you then say "this is now for personal and I claim the 50% taxable only rule"
This is why the cra lines are always busy huh lol

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