Capital Gains Tax: Whispers Of An Increase

http://www.theglobeandmail.com/globe-investor/soak-the-rich-federal-budget-could-be-coming-soon-says-rosenberg/article34045810/

You may want to have a look at the article above, but basically, it says:

Gluskin Sheff + Associates chief economist David Rosenberg says he has been hearing whispers that the federal Liberals will table a “soak the rich” budget in the weeks ahead – one that includes a steep hike in the tax rate on capital gains.

Mr. Rosenberg said in his morning note that the capital-gains inclusion rate could rise to 75 per cent from the current 50 per cent, which has been the rate since 2000. Returning the rate to that level, combined with the most recent uptick in the top marginal personal income tax rate, would mean that Ontario investors would pay as much as 40 per cent tax on capital gains.

This would be significant. If your "buy and hold" strategy has amassed a large unrealized capital gain in your non-registered (sometimes referred to as a "cash") account, you may want to have a chat with your accountant about the ultimate implications. Especially if you are retired and rely on the sale of non-registered assets for your cash flow. It will certainly have implications for your estate or any other circumstances where a "deemed distribution" (deemed to have disposed of/sold assets) might be necessary.

Depending on how this scenario is phased in (if in fact it actually happens) it could have serious implications for the selling of stocks, bonds, ETF's, mutual funds and secondary (investment) real estate. Needless to say, the impact on these asset prices would be negative.

It is why a Wealth Forecast is a dynamic process or "working model" (monitor, update, re-assess) because as new scenarios evolve in your financial life, you want to be able to build in those new scenarios (and assumptions) to understand how this will impact your net worth into the future.

Of course this is pure speculation at the moment.

However, it is better to be prepared than to be caught of guard, if it actually does happen. 

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scott@highrockcapital.ca

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