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Planning Ahead for a Potential Capital Gain Rate Increase

 

This is likely not the first post you have read which speculates the capital gain rate will increase. Advisors have been speculating that a rise in the capital gain rate would occur for several years.

The most recent happenings that further support a probable change are:

  • The US recently announced proposals to significantly increase their long-term capital gain rate from 20% to as high as 31.8%; and
  • The new Liberal minority government will likely be influenced by the NDP who campaigned on significant increases in tax rates (including increasing the capital gain inclusion rate from 50% to 75%.

 

So what does this mean for you?

 

There is no certainty when a potential increase would happen. As the saying goes, “the tax-tail should not wag the dog”. However, it is appropriate to do some tax planning and consider strategies that make sense financially and for tax purposes such as:

  • Trigger unrealized capital gains for assets that you plan on selling in the short term;
  • Rebalance non-registered investment portfolio and trigger unrealized gains;
  • Transfer appreciated securities to a holding company and trigger a gain on the transfer; and
  • Transfer appreciated securities to a spouse at fair market value;

 

There are other ways to potentially trigger capital gains and “lock in” the rate today in a tax efficient manner as part of your overall compensation planning. Now is a good time to start talking to your tax advisor to plan for potential changes.

If you have any questions or would like to discuss your options, please reach out to Shane Schepens.