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Taxes in Canada on Dividend Capture Strategy?

  • Last Updated:
  • Aug 13th, 2019 4:17 pm
[OP]
Member
Oct 22, 2016
380 posts
303 upvotes
Comox Valley

Taxes in Canada on Dividend Capture Strategy?

Investopedia has an article on Dividend Capture Strategy https://www.investopedia.com/articles/s ... rategy.asp As they state "frequent buying and selling of shares, holding them for only a short period of time–just long enough to capture the dividend".

I am thinking of doing this for some of the Canadian Banks, but before I do that, I want to know how this is treated by the CRA. The IRS as article states "According to the IRS, in order to be qualified for the special tax rates, "you must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date."

Does CRA do it the same, I will not get the dividend tax credit, but any income will be treated as ordinary income, other words taxed at full rate.

Thanks beforehand.
2 replies
Deal Addict
Oct 6, 2015
2461 posts
1346 upvotes
Canada doesn't differentiate between short term and long-term capital gains. Unlike the US.

If you are deemed as conducting a business with your investing, the CRA has the theoretical capability of deeming trades to be on an 'income' account. However, you'd have to be using the skills of a professional in the securities business, you'd have to be using a lot of borrowed money, and there are some other tests. Just doing such as an individual investor likely would not tilt the tables enough to get the CRA to consider you to be trading as a business.

Having said that, if such strategy were actually profitable, then funds likely would be doing it. Especially with those bank shares, you may very well be taking risks, even holding for short periods, that you don't really understand. Sure, you might make a few percent excess return in the short term doing so, *but* it only takes a bad day or two to wipe that out.
[OP]
Member
Oct 22, 2016
380 posts
303 upvotes
Comox Valley
burnt69 wrote: Canada doesn't differentiate between short term and long-term capital gains. Unlike the US.

If you are deemed as conducting a business with your investing, the CRA has the theoretical capability of deeming trades to be on an 'income' account. However, you'd have to be using the skills of a professional in the securities business, you'd have to be using a lot of borrowed money, and there are some other tests. Just doing such as an individual investor likely would not tilt the tables enough to get the CRA to consider you to be trading as a business.

Having said that, if such strategy were actually profitable, then funds likely would be doing it. Especially with those bank shares, you may very well be taking risks, even holding for short periods, that you don't really understand. Sure, you might make a few percent excess return in the short term doing so, *but* it only takes a bad day or two to wipe that out.
Thank you for the reply, and your thoughts on. Much appreciated.

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