If you have bought and sold capital property this year you should review these transactions to determine whether you need to do some balancing transactions.  The effect of selling off investments to create gains or losses can improve your income tax position for 2016. This year, you have until December 27^th to make any transactions count.

To begin:  Gather the following information and book an appointment with one of our financial advisors:

1. Find your notice of assessment (NOA) from 2015 which includes description of your tax assessment and carry forward summary from previous years.
2. Compile a list of transactions that resulted in a gain or loss from your non-registered investment accounts. Gains or losses are your proceeds from sale of investments, less your adjusted cost base (ACB). Your financial advisor can provide you with such a report, or, create a spreadsheet adding all of the proceeds from the investments sold, and subtract the ACB of those same investments.

• Any other capital property sold in 2016, other than your personal residence, is a capital gain or loss that should be included in your total gain or loss.

Calculate your current taxable gain position with the following:

1. NOA Capital loss Carry-forward 2015 $ (______________________)
2. Capital gain or loss from securities $ _______________________
3. Capital gain or loss on capital property $ _______________________
4. Total capital gain = lines 2+3 $ _______________________
5. Taxable Capital Gains = (line 4 X 0.5) $ _______________________

If line 5 minus line 1 is positive, you should consider a tax loss selling strategy because:

1. The taxable gain identified in 5 may push you into a new marginal tax bracket.
2. You may be subject to OAS claw back if income is above $73756.
3. You have unrealized capital gains or losses in your investment account.
4. You may lose your guaranteed income supplement benefit for one year.
5. Pharmacare entitlements may also be lost for one year.

If line 1 plus line 5 is negative, you should consider reducing loss by selling investments with unrealized capital gain to balance the gain or loss as close to zero as possible.

Tax loss selling is a strategy that reduces taxable capital gains, resulting in the least amount of tax payable for the current year.  This strategy can also be used to reduce previous years reported gains to $0.  Each situation will be different, with the most appropriate action resulting in lower tax being paid or a refund of prior year’s income tax.  If you would like help with your tax loss selling, please give our office a call at (250) 338-2715, or visit our website at www.cvinfinitywealth.com.

This article was prepared solely by Mark Nichol, Roy Collings, and David Storrie who are registered representatives of HollisWealth® (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada).  The views and opinions, including any recommendations, expressed in this article are those of Infinity Wealth alone and not those of HollisWealth. The comments contained herein are general in nature and professional advice regarding an individual’s particular situation should be obtained in respect of any person’s specific circumstances. HollisWealth and the Scotiabank companies do not provide income tax preparation services nor do they supervise or review other persons who may provide such services.® Registered trademark of The Bank of Nova Scotia, used under licence.

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1. Pay back loans that were borrowed to invest.
2. Trim your high risk investments, as well as any illiquid assets.
3. Asset diversification helps provide more stable returns.
4. Consider diversifying globally.
5. Rebalance your assets regularly.

How should you rebalance your portfolio in order to protect your investments during volatile markets?

Rebalance your investment plans during volatile times.  It is beneficial in the long run to operate your account much like a balanced mutual fund. Selling high and buying low creates wealth in the long-term.  Imagine a balanced scale where 50% of your assets are in bonds and the other 50% is in stocks (equities).  Since we have witnessed a devaluation of your holdings in equities, your current holdings are now out of balance and your portfolio is subsequently weighted 60% bonds and 40% equities.  In order to rebalance, you will have to sell 10% of the value of the account out of bonds and buy that 10% into equities.  This rebalancing equation should be reviewed again when the equities revalue.   When equities make up 60% of the value of your portfolio, you would choose to sell 10% of the value of the portfolio from equities and repurchase bonds.  Many balanced mutual funds and private pools of funds operate on this rebalancing scheme.

How to Make the Best of Volatile Markets:

Volatility in the market has been created by a drop in oil prices and slower growth in China, as well as geopolitical unrest. But with every reason for a decline in the global market, there also comes hope for positive gains. Because the nature of the market is balanced, when markets are volatile and some investments begin to fall, there are often other investments that are going up. Our lower dollar boosts exports; falling oil prices have benefits for consumers and interest rate hikes ultimately signal a stronger economy and lower unemployment. Our strategy involves finding these positives and buying opportunities. Volatility is an important part of investing and market declines have often been followed by greater recoveries. The willingness to endure volatility over time has tended to reward the disciplined investor. To be better prepared, we stress the importance of a great investment strategy that is reviewed with your financial advisor on a quarterly or semi-annual basis.

This article was prepared solely by Mark Nichol, Roy Collings, and David Storrie who are registered representatives of HollisWealth® is a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trade name and business name under which Industrial Alliance Securities Inc. operates. The views and opinions, including any recommendations, expressed in this article are those of Infinity Wealth alone and not those of HollisWealth. The comments contained herein are general in nature and professional advice regarding an individual’s particular situation should be obtained in respect of any person’s specific circumstances. HollisWealth and the Industrial Alliance Securities Inc. (iA Securities) companies do not provide income tax preparation services nor do they supervise or review other persons who may provide such services. Infinity Wealth is a personal trade name of Mark Nichol, Roy Collings, and David Storrie.

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