New Capital Gains Tax - Sell or Hold Calculator

At TriDelta Private Wealth, when working with those with a Corporation or Trust, we try to understand the overall picture in order to best provide advice.  There is the data analysis component, and then there is the personal element of advising using that broader understanding.  With the new budget rules on Capital Gains taxes, we felt that a calculator would be a great tool to help with the data part of the equation whether to sell or hold investments with an unrealized capital gain.  It is a great start, but the final decision requires a more personal understanding.

We hope that this calculator will be of value to you and provide a great start.

New Capital Gains Tax - Sell or Hold Calculator - Help

While we have included room for expected rates of return, the actual tax on that return will differ depending on the individual investment.  We have included a place to identify what percentage of the expected return will be from income.  However, the actual tax shown here is an estimate based on whether growth is from either capital gains or Canadian dividend income.  We have not accounted for whether the income could be considered interest, foreign income, other income or return of capital.

Current Market Value in Canadian dollars of investment for possible sale

  • This would be the current value in Canadian dollars of the investment(s) being reviewed.

Book Value in Canadian Dollars of Investment

  • The Book Value is essentially the cost of the investment.  This information can usually be found on your investment statement.

Expected Rate of Return

  • What you believe is a reasonable long term rate of return from a particular investment or group of investments that you are considering selling.

Percentage of Return from Income/Dividend Yield

  • If you expect a rate of return of 8% and an investment or group of investments have a 4% income yield, then the percentage of rate of return from Income would be 50%.  If the income yield is 2%, and the expected rate of return is 6%, then the percentage of rate of return from Income would be 33%.
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  • The calculator doesn't fully integrate the new Capital Dividend Account impacts into the analysis.
  • The new Capital Gains rules will have a meaningful impact on the Capital Dividend Account for Canadian Controlled Private Corporations (CCPCs.) 
  • Under the Old Regime, the Non-Taxable portion of all Capital Gains would Credit the Capital Dividend Account.  This was 50% of the total Gain.
  • Under the New Regime, the Non-Taxable portion of all Capital Gains would Credit the Capital Dividend Account.  This is 33.33% of the total Gain.
  • As an example, if a $100k Capital Gain was generated, the Capital Dividend Credit would be $16.7k less under the new regime. 
    • Since a Capital Dividend results in a tax-free Dividend to the Shareholders, assuming the highest marginal tax rate (effectively 48% for Ineligible Dividends), this would mean that the Shareholder would effectively pay $8k MORE tax under the NEW Regime.
    • In simplified terms, this can probably be viewed as 8% more in aggregate taxes in the New Regime vs. the Old Regime.
A note about Capital Dividend Accounts in the new tax regime
*Based on your inputs, a positive number represents the net benefit of selling an investment early to lock in the lower capital gains rate and then reinvesting the after tax amount back in the same security as compared to simply holding on to the security.  Each time period assumes that you sold the security at the same time and compares the net after tax result.  For example, if the number is positive after 3 years, it suggests you would have been better off to sell the security prior to the change in capital gains, if you would otherwise have held it and paid higher capital gains rates in 3 years.  If the number shows as a negative, it means that if you sold the security in that listed time period, you would have been better off holding the security and selling it 'x' years in the future, rather than selling prior to June 25th. This calculator assumes an Ontario resident.

IMPORTANT DISCLAIMER: The TriDelta New Capital Gains Tax - Sell or Hold Calculator is meant to be a useful tool to manage the time sensitive question of what to do with investments in your Corporation or Trust with unrealized capital gains.  This is not meant to be considered advice on any trade.  Each situation and investment is different and requires further thought before a final decision is made.

This calculator is for illustrative purposes only and it is best to consult with a TriDelta Wealth Advisor or other professional advisor for more robust and comprehensive advice.

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