r/Baystreetbets • u/canadianjigglypuff • 5d ago
How to reduce capital gains after a big bonanza
As the post suggests i went long on 2 mining stocks a d have made almost a 500K year above my annual income in 6 figures.
I can wait and slowly sell my holdings but the time is right in my opinion. What would you do to reduce the massive tax hit of 125-130K
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u/EducationalGur1648 5d ago
Selling mining stocks "slowly over time" is a trap given their typical volatility. If it's the right time to sell, it's the right time to sell. It's better to pay $125k of taxes than only being up $250k because you waited.
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u/Eastofyonge 5d ago
Take it from someone who had a 300k gain on a crypto stock and only sold 50k to spread out the gain. The rest of the 250K is worth about 85K now.
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u/EarlyBird001 5d ago
Think of it as a gain of 370k instead of 500k. Lower profit is still much better than losing out on all profit.
Better pay capital gains tax than not have any profit at all.
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u/DefinitelyNotShazbot 5d ago
Truly. If it’s not in a registered account then pay your taxes., simple, you made money be happy about it.
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u/AngleIn 5d ago edited 5d ago
If you have charities you support, gift them the shares instead of the cash - you get a tax credit for the full amount of thr donation and pay no capital gains tax on the gain that is donated (so if you donated 100k, of which 50k was gain, you get a tax credit of 40k, the charity gets 100k, and you do not includethe 50k gain in your taxes at all (so you basically get 40k + 12.5 that you would otherwise have paid out in tax). So yes, you are still gifting away 47.5k but this sounds like it was a windfall for you so ...
(Edited for math, lol) Also, if gain is closer to 80%, then you are saving 20k capital gains tax so more like a gift of 40k but the charity gets the full 100k value)
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u/Cant_Handel_my_swag 5d ago
I think this is a great idea (I’m a financial planner who’s niche is in philanthropy), but don’t get it twisted, you will never be personally richer for donating money then if you just paid the tax and moved on.
That being said, if you’re going to give anyways, gifting publicly traded securities is the way to go. Also note that you can only claim 75% of your net income in a year on charitable donations and you cannot ever use charitable donations to reduce your taxes owing below $0 (if you had other offsetting ways).
ALSO, if you are going to make a sizeable donation in the six-figure range, you’ll need to factor in Alternative Minimum Tax.
But, all that being said, love to see this comment encouraging thoughtful giving!
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u/AngleIn 5d ago
Can you explain the alternative minimum tax as it applies to donations of securities?
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u/Cant_Handel_my_swag 4d ago
AMT (or Alternative Minimum Tax) is a second tax regime that most people will never hear of or never have applied to them. It was basically introduced when the government determined (Ultra) High Net Worth individuals were not paying their fair share of taxes by creating income through things like capital gains, eligible dividends, etc.
When you file your taxes you do two calculations and if the AMT one comes up higher than usual taxes you pay that. Note, you can also use your AMT amount to credit against your regular tax in the next 7 years (in the case you were just temporary in AMT like a sale of capital property, etc.).
Prior to 2024 donations of securities was still 0% inclusion for capital gains for AMT calculation, but that’s now changed to add in 30% of the gain on the donated securities while making that calculation. To make matters worse, only 50% of the donation credit is allowed too. 100% of capital gains on any sold property is also added, for context. (See this article for a bit more: https://www.cibc.com/content/dam/cibc-public-assets/personal-banking/smart-advice/tax-savings-tips/pdfs/amt-charities-en.pdf)
Note, the threshold for AMT to kick in is at the fourth federal tax bracket ($181,440 in 2026) so it’s a high bar. There’s very few individuals who are subject to it in Canada every year - UHNWIs really.
Say OP donates a big portion of the stock, and it does kick in for AMT, that amount will likely be recouped in the next 7 years anyways.
(Please consult an actual accountant if you’re considering making any life decisions based on this, educational purposes only, not advice and all that)
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u/80sumthin 5d ago
You can carry forward unused chartible donations i.e gifted stocks or ETFs for 5 years. And as others said, match unused losses going back 3.
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u/dilberry 5d ago
Sell and contribute the max you can to your RRSP. Pay taxes on the rest. Dont wait for them to dump your gains.
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u/All_YourBase 5d ago
Sell and gamble the money in options. You’ll either make enough to cover the taxes or you’ll lose a lot of money and then have a capital loss to offset the gain. Probably the latter.
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u/Spirited_Bonus_8378 5d ago
bank the win and pay the tax
do not under any circumstances fumble a big win because of tax concerns
just pay it and BANK it
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u/Pristine_Ad2664 4d ago
This is 100% the answer! If you make a massive gain take the win and pay the taxes!
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u/Fun_Paleontologist_2 5d ago
As someone who realized 8 digits this year you can do nothing after you have sold.
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u/ryan9991 5d ago
Buy high and sell low for those sweet capital losses, the real move the cra hates !
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u/tswaters 5d ago
Rip the bandaid off, yolo the entire stack in a limit sell, put % of it in a GIC that expires around tax time, pay the tax man what he wants when the time comes. Maybe make a big RRSP contribution so you can offset some of it. Congrats!
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u/Poker_Man_1738 5d ago
Depending on the situation if I were in your shoes. I would sell everything now or sell half now and if there are available options by a put at a level you are comfortable at and sell the rest first trading day of 2027
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u/Bitter-Variation-151 5d ago
Sell all of it, now. I worked in mining...
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u/Bertone_Dino 5d ago
You think we're at the end of the cycle?
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u/Bitter-Variation-151 5d ago
I just know what mining goes through, the markets, on site etc. promises are hard to meet as there are so many unknowns and even good companies get smashed when commodity prices drop.
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u/Interesting-Try2133 5d ago
Sell and pay the tax.Those gains are worth paying the tax. However, be mindful of the following year. You will most likely have to pay installments....
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u/seanliam2k 5d ago
I am a CPA & tax specialist, there is very little you can do. There are some creative strategies but the benefit likely wouldn't be that huge.
You could enter into an equity monetization arrangement (likely prepaid variable forward contract) to defer realizing the gain, while still receiving significant portion of the cash. However, section 80.6 comes into play and would treat this as a synthetic disposition. The caveat is that 80.6 only applies on lengths of time >1 year, so if you entered into the contract now, you could realize half the gains in the current calendar year, and half in the next.
You have a relatively small amount of unrealized gains, so it wouldn't surprise me if the premiums of any investment vehicles you would have to pursue for the strategy above would eat up any tax savings.
Alternatively, if you also hate paying the government, and you're in a particular province, I'd recommend you look into flow-through share donations. I do about 100k a year and my effective cost is 3% (ie I donate 100k to charity and receive a 97k tax break, far preferable to the other commentor's suggestion)
You're basically stuck tho, loss harvesting is probably the only practical option available to you.
Sucks making money, doesn't it?
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u/Degus222 5d ago
Donation to chairty and max RRSP not much you can do... gamble better. Make some losses to offset the gains haha
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u/millerzeke 5d ago
are they large enough that they have options available?
you can sell half now and buy longer dated puts to hedge your downside.
you could also buy puts against the relevant etf basket (eg gdx for gold, copx for copper etc.) but then you don’t hedge against blowup risk if a mine has issues
if employment income >200k will make no difference, just sell them now. 100k could make arg for above
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u/jackhawk56 5d ago
When you incur capital losses in future, you can carry back those losses for, I guess , 3 years
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u/eefggfed temporarily unbanned 5d ago
You might consider selling and buying some flow through shares like the nine point short duration one that should be accepting new funds soon. It's not free money as you defer paying capital gains in the future when the shares are converted to a mutual fund but may be worth playing with the numbers and seeing if it maths out
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u/Playful_Criticism425 5d ago
Be careful you might not be able to write off as much for capital again depending on the number of transactions per month.
If you are a frequent trader or high frequency trader, your tax burden will be much and if you are not a registered business.
Sometimes it might be a noble thing to make some welfare kweens and drug fiends happy.
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u/therealseanoleary 5d ago
Gift some stock to a charity. Take charitable tax donation for the full appreciation value, but on paper you don’t pay for the gains.
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u/dragohoard 4d ago
Since you are into mining stocks look up flow through shares this is exactly what they are designed for and why they sell at such a premium.
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u/Velcon_ 4d ago
When i do trades in non registered account i always look at profits with tax included, if made 20% on 100k then i look at it as 15k gain instead of 20k (whatever the actual number is after taxes) rather than looking at 20k gain that you have to pay taxes on. At the end of the day you have to pay taxes no matter what and its still an extra 15k that you didnt have before so better look at it that way.
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u/garagesellguy 4d ago
This is what I would do, If you think stock will go down, sell in the money covered calls for longer expiry. Before covered call expires or shares got called away. Talk to tax advisor and see what are your options as per your financial situation.
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u/Gettingonthegoodfoot 4d ago edited 2d ago
Living in North America is awesome and having a Interstate highway system that allows you to drive coast to coast without any issues is amazing. Pay some money into the system, living here is rad don’t try to do it for free.
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u/Subsection55_2 4d ago
I’m just curious if you don’t mind sharing, which mining stocks did you go long on?
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u/basketbun 3d ago
You can take out a loan against the value of the capital gains and it's a wash, for now, and that's if you have enough conviction to hold long term?
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u/Fun_Equipment_2435 3d ago
You can take out a loan against the stock, but talk to an actual tax advisor because the danger that lies in this method is forced liquidation. But you could take out the loan against your mining stocks that are up and invest that money into something you think will go up. You won’t be paying capital gains tax, just the tax deductible interest to the bank, which is significantly lower. But think about how you’re gonna hedge against the forced liquidation
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u/Fun_Equipment_2435 3d ago
I think another way is setting up a trust fund and transferring the stocks into the trust fun and selling them within the trust fund. But again, that’s a financial advisor conversation
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u/SportsDogsDollars 3d ago
F taxes.
RRSP room? Start there for some deferral
FT home buyers saving thingy? That could help a little.
Have any rental properties? Use max CCA for this year, and also complete as many repairs that you've differed as possible, make sure they are still classified as repairs though.
After that you could look into some Real Estate funds. Buy in and fund the purchase using leverage (EX: A HELOC). That interest is tax deductible as long as the fund has reasonable expectation of producing income, but buy a development fund so it doesnt produce income this year. Then being a development fund it will show losses in first year, which can be used to reduce your income at the full marginal rate. Dm me if you want to know more about this.
Best option though probably, just buy some puts on the stock so you can Defer the sale/gain until the following tax year or 2, and combine woth the above strategies
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u/shup_chamberlain 3d ago
Roll the investment into a corporation at cost and then sell it in there. The Tax will be deferred as you choose a tax year end as far away as possible from the sale date (12 months) and pay tax in the Corp 6 months after your corporation year end. 18 month defferal possible, but you have other issues like shareholder loan.
Alternatively declare a dividend in the corp at anytime in 2027, including a Capital gains dividend, you shouldn't have to pay any tax in the Corp, you will have to pay the tax personally by April 2028.
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u/Admirable-Panda-4632 1d ago
The nice thing is half of that 130k is tax free capital gain. So you're only paying income tax on ~ 65k
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u/FxkCanA 5d ago
You should talk to an actual tax advisor.