The sale of shares involves specific tax implications that are important to understand in order to meet your tax obligations. Wondering how to report the sale of shares in your tax return? Learn more about the taxation rules for selling shares in Quebec with EB Conseil Fiscal!
How are capital gains calculated?
In Quebec, capital gains realized on the sale of shares are calculated based on three main elements:
- The proceeds of disposition: the amount received when the shares are sold, representing their value at the time of the transaction.
- The adjusted cost base (ACB): the initial cost of the shares, including brokerage fees and reinvestments, representing the total amount invested.
- The capital gain: the difference between the proceeds of disposition and the ACB.
Capital gain = Proceeds of disposition – ACB
If the proceeds of disposition are lower than the ACB, you will record a capital loss.
What portion of capital gains is taxable?
In Canada, including Quebec, only 50% of the net capital gain is included in your taxable income.
Capital losses can be used to offset capital gains in the current year, the previous three years, or future years.
How to report the sale of shares on your tax return?
When you file your tax return, you must report your capital gains and losses in the following documents:
- Schedule 3 (federal): declaration of capital gains and losses.
- Schedule G (Quebec): declaration of capital gains and losses.
- Relevé 18: information on securities transactions (provided by the broker).
Be sure to keep all transaction statements to justify the reported amounts.
Tax rules for registered and non-registered accounts
Selling shares in a registered account
Transactions in a RRSP, TFSA, or RRIF do not generate taxable capital gains or losses as long as the funds remain within the account.
Selling shares in a non-registered account
Capital gains realized in a non-registered account are taxable. To adjust the ACB, include brokerage fees and dividend reinvestments.
Cumulative capital gains exemption
You may qualify for a cumulative capital gains exemption (CCGE) for eligible small business shares, provided the following conditions are met:
- The shares must have been held for at least 24 months.
- The company must be a Canadian-controlled private corporation (CCPC).
Tax planning and strategies
To reduce taxes on your capital gains:
- Year-end strategy: sell shares at a loss to offset gains for the year.
- Avoid the 30-day rule: if you repurchase the same shares within this period, the loss may be disallowed.
- Income splitting: consider transferring shares to a spouse to optimize taxation.
Optimize your taxation with EB Conseil Fiscal
The taxation of sold shares requires expertise to correctly report your capital gains and losses. Consult a tax accountant to maximize your tax benefits and ensure compliance. With proper planning, you can optimize your financial situation while avoiding costly mistakes.
