Capital gains are a wonderful way to make money because they are taxed at 50% less than interest and employment income but the best part is that they are only taxed when you sell the investment, so potentially you can defer them almost forever (when you die, you can pass to your spouse tax free, but if there is no spouse, the tax is then payable). Combining absolute tax savings with tax deferral is a beautiful concept and it makes sense too. You should be rewarded for taking a risk – capital gains are sometimes hard to get. The only…
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CAPITAL GAINS/LOSSES
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DIVIDENDS
Dividends are distributions of after-tax profit to registered owners of common or preferred shares. These are usually paid quarterly. There are many kinds of dividends but I will confine this discussion to the most common, which are eligible dividends. Dividends from large corporations like banks, manufacturers, oil and gas companies etc. are usually going to be eligible. Eligible dividends are subject to gross-up (making them bigger) offset by a dividend tax credit. We don't need to get into the mechanics of this. The important thing is that eligible dividends are taxed much less than interest income. The exact amount of…
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