Capital account vs income account and business structure

[rb]

 

 

From what I read about your situation you are ok to claim your capital gains and losses as capital gains and losses. Also you should go ahead and claim the interest paid on margin loans - nothing wrong with that. It goes on the "Carrying Charges" line. A few things to keep in mind that may apply to you though:

-gains and losses from short sales are always income

-gains and losses from naked options are always income

-gains and losses from covered options normally get the same treatment as the underlying shares do

-if you hold a security for less than (I think it's 30 days - double check) then the gain or loss is income

-if you hold a security, sell it, and the buy back into it after less then 30 days (again check), then you must claim the capital gain if it was a gain, but you cannot claim the loss if it was a capital loss. In that case you go back and adjust

 

rb

 

rb, To clarify, When you buy call options or put options on an underlying security it is treated as capital gains or loss, as the case may be, not income.  Line 127 of T1

See bolded line above

[Uccmal]

 

 

From what I read about your situation you are ok to claim your capital gains and losses as capital gains and losses. Also you should go ahead and claim the interest paid on margin loans - nothing wrong with that. It goes on the "Carrying Charges" line. A few things to keep in mind that may apply to you though:

-gains and losses from short sales are always income

-gains and losses from naked options are always income

-gains and losses from covered options normally get the same treatment as the underlying shares do

-if you hold a security for less than (I think it's 30 days - double check) then the gain or loss is income

-if you hold a security, sell it, and the buy back into it after less then 30 days (again check), then you must claim the capital gain if it was a gain, but you cannot claim the loss if it was a capital loss. In that case you go back and adjust

 

rb

 

rb, To clarify, When you buy call options or put options on an underlying security it is treated as capital gains or loss, as the case may be, not income.  Line 127 of T1

See bolded line above

 

We are talking past one another.  What I am clarifying is that when an investor buys uncovered calls or puts they are treated the same as any common stock.  The gains or losses are classified as capital transactions, not income as per Line 127 of form T1. 

 

In addition selling puts or calls, uncovered, can be treated, by an individual, as capital gains (losses) as long as you are consistent from transaction to transaction and year to year. 

 

Often times consistency in reporting is the key.  An example of this is converting foreign exchange.  You can elect to do it transaction by transaction, if your truly masochistic, or you can use the yearly average.  So long as you are consistent and not trying to game the system either option is acceptable.