Investing Tax Tip

Earlier this year in April I started a swing trade which included some Suncor stocks. I mentioned how it was an undervalued company and how the stock will likely make a comeback πŸ™‚ So I bought 100 shares at $28 each. Well I just heard on the news that Warren Buffett alsoΒ bought some Suncor shares for his holding company Berkshire Hathaway πŸ™‚ Hey, maybe… just MAYBE.. he reads my blog and that’s what gave him the idea to invest in Suncor as well (^_-) Hi Warren πŸ™‚ I’m a big fan!

Buffett had picked up 17,800,000 shares of Suncor 😯 When the oracle of Omaha is confident enough to put over $500 million into a company, you know it’s a good investment 😎 Right now Suncor is the only Canadian holding inside Birkshire. Yay, go oil sands! Β Represent Canada! I”m not sure what price Buffett paid for his SU shares, but I managed to get mine around when the stock bottomed, so this could mean I’m a better investor than Warren Buffett πŸ˜† Or I just got lucky I suppose. But now I’m faced with a dilemma. I was planning to sell my swing trade when I made $1,000 from it, which I have now. The stock climbed to $35/share today. But now that the world knows Suncor is in Berkshire Hathaway’s portfolio there may be increased global interest in this company. Selling when Warren Buffett is buying may not be smart πŸ˜•13_08_suncorchart

Eventually though I will have to sell and most likely make a nice profit from it. But one drawback of making money through any kind of investing is those darn taxes on dividends, interest, etc (>.<)Β Here’s a simple tip to save butt-loads on investment taxes. Before you invest, give the money to someone else in a lower tax bracket whom you trust, and invest the money under his or her name instead of yours πŸ˜€

Right now for example, my dividend income is taxed at between 6% and 12% according to my tax calc πŸ™ But if I had a kid who was 18 or older, I can give him the money to invest and if he’s not actively making more than $40,000 a year, he won’t pay any taxes on the dividends he receives πŸ˜€ Giving money away is perfectly legal. And no tax for the receiver because it’s a gift ^_^ So if you have elderly parents who aren’t making a large income anymore, you can put your investment capital into their account and let THEM claim any dividends or capital gains realized on it πŸ™‚ Nursing homes are pretty expensive these days. If you have to take care of them financially, why not save your family some taxes πŸ˜€

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Financial Independence
08/16/2013 12:57 am

This is good advice if you trust the person who’s name you are investing in (i.e. a spouse or child) but for non-US readers it is important to check the tax treatment of investment income for minors – here in Australia minors pay 66% tax on investment income over $417/y (drops to 46% after $1307/y investment income) as a way of discouraging people structuring their assets under minors who otherwise would be paying minimal if any tax.

Marissa @ Thirty Six Months
08/16/2013 7:18 am

I couldn’t agree more with you. When you’re investing in someone’s name, it’s indispensable that you know them very well.

Mrs PoP @ planting our pennies
08/16/2013 6:35 am

In the US, there actually is a gift tax. The exclusion is currently $14K, I think. Amounts over that would be taxed.

08/16/2013 1:14 pm

NOT QUITE > You need to be very careful passing money through family. There are taxes involved. I make no income, but my wife does. In this case if she wants me to invest money, she needs to “lend” me money at a very basic interest rate, I think when I last looked it was 1.0% for family loans. Secondly when gifting money to kids you need to make sure it is not the parents transferring the money, but other family so not to confuse the gift with what really should be a deemed a loan. Yes there are many who pass money freely amongst family, but they are actually breaking the Cdn tax rules in doing so, and as long as they are not audited, no issues…
If things have changed great, and someone let me know, but when dealing with family you still need to be careful as CRA always find a way to get their cut – Cheer.

08/19/2013 5:52 am

I think you meant kids RESP’s vs. kids RRSP’s. RESP’s are slightly different than RRSP’s, in that I as a parent/grandparent can put money into an RRSP, that will eventually be taxed in the child’s name. I’m no tax expert either, but over time I’ve learned about those areas in tax law that affect what I do – Cheers.

$25000 dividends
$25000 dividends
08/17/2013 2:37 am

Good call on Suncor. You picked it up at a better price than I. I got 180 shares at an average cost of $30.25. If I sell I could make about $1000 in capital gains. I’m going to hold this one and hope for modest dividend increases and gradual capital gains. If it goes up to $40 that’s another grand. I had purchased Bank of America back when it was $6 and it’s now at $14. I’m still holding that one despite gains. Sticking to the same motto for Suncor.

08/19/2013 7:35 pm

My top tip is don’t spend more than you earn.