Who reports capital gains taxes if a stock is owned jointly? - MoneySense

Who reports capital gains if a stock is owned jointly?

When you invest together, you get taxed together


Q.  My question is regarding stock capital gains, specifically in a joint account with my wife at TD Waterhouse. We had a capital gain of $30,000 this year in our non-registered account. At 50% each, our capital gain for tax purposes is $15,000. Do we each have to report a gain of $7,500? Or, does just one of us report the total gain? Or is there another option?

– Thanks, Eldon M.

A. Hi Eldon.  Two things to know in reporting this transaction: first, how capital gains are taxed.  This can be complicated, depending on the type of investment you have, but broadly speaking, when your Proceeds of Disposition are more than the Adjusted Cost Base minus your outlays and expenses, the result may be a capital gain. Half of that gain is taxable; that is, it is added to your other income for the year, and subject to your marginal tax rate.

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Capital gains can be offset by capital losses incurred in the current year, or by capital losses incurred in prior years. In fact, your unused capital loss balance can go all the way back to 1972, the year capital gains became taxable in Canada. That’s why it’s so important for people to record their capital losses every year, even if there are no gains to report. Capital losses can be carried forward throughout your entire lifetime to offset capital gains in your future. They can also offset capital gains of the immediately preceding three years in any order.

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The second thing you need to know is who reports the income?  This will depend on the source of the capital (that is, the source of the capital you used to purchase the stocks). Did it all originate with you?  In that case, you report all the gains. Did you and your spouse each contribute the source capital equally? In that case, you each report 50% of the capital gains. Did 60% of it originate from your spouse?  You guessed it—she reports 60% and you report 40%.  It may be prudent to get some professional help if this is your first go at reporting this type of income.