The Capital Gains Blog

Archive for December, 2005

Question: Capital Gains Tax on shares?

Hello. I purchased £60,000 shares in 2003 and they are now worth £170,000. I would like to sell all the shares today but I wondered if there was anyway of minimising my capital gains tax. Would I have to pay tax at 40% (my income tax rate) above the tax free allowance i.e £8800. I am married and I have a child and resident in the UK. Many Thanks

Answer: If you have held the shares for more than 3 years your gain is reduced by what is known as taper relief – if you hold them for 3 years, you are only charged on 95% of the gain, for 4 years only on 90%. This reduces by 5% each year until after 10 or more years you are only charged tax on 60% of the gain.
In your case, assuming you have held the shares for 4 complete years, your gain is £110,000 (170 less 60) -this would be reduced by 10% – to £99,000. As you say, you have an annual exemption of £8,800 so you will be charged tax on £90,200 at your income tax rate of 40% – meaning tax of £36,800.
If instead, you transfer half the shares to your wife there is no capital gains on that transaction – and so if you both sell them immediately after you both make a gain of £49,500. The annual exemption reduces that to £40,700 gain each. Your tax would be 40% of this – £16,280. If your wife was a higher rate taxpayer she would also have to pay £16,280 making a total bill of £32,560. However, if she is only a basic rate taxpayer would only have to pay 20% on the gain until her other income and the gain make her a higher rate tax payer – after she reaches the threshold for higher rate tax she must pay 40% of any gain above that level.
Your best course of action – unless you really must sell all the shares now is to transfer half to your wife and then each sell half of what remains now and the other half after 6 April 2008 (next tax year). This way you can each use 2 years annual exemptions. You would both have gains of £27,500 in each tax year. Taper relief reduces this by 10% to £24,750 – the annual exemption reduces this to £15,950 which if taxed at 40% is £6,380 each this year and £6380 each next year. So you would each pay £12,760 – making a total of £25,520 payable in total (less if part of your wifes gain is not at higher rate tax)
Hope this helps a bit

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Question: Income Tax on capital gains by my wife, investment funded by me?

Hi,

My wife has no source of income. I opened a demat account on my wife’s name, and transfer money to it from our joint bank account and started trading. What kind of income taxing does the gains from those investments attract? Will the money funded by me be treated as gifts or income to my wife? Will the returns on investments be treated as capital gains or direct-income to my wife?

I live in India, so could some one please answer according to Indian income tax law?

Thanks!

Answer: In your case, it is the discretion of the Income Tax officer.

If he accepts it as gift:

Gift to wife is allowed without gift tax on it. But again the income of the wife will be added to husbands income. In this view, the entire income of the wife is added to husbands income.

If the amount transferred is treated as loan to wife:

Wife must pay some interest (say 6%pa or so) to husband as interest on loan given by husband. It should not be interest free loan at all. In this case the income of the wife through shares transactions may be the income of wife.

About capital gains or trading.

Again it is difficult to determine. Now a days most of the people are doing day trading. Some times they take delivery and selling them when the rates have gone up. If you have not done day trading at all, then the gain may be taken as capital gains. If the transactions are mixed with both, then it is better opt it as trading. (not capital gains).

If the gains are less it is OK. If the gains are more than 1 lakh, then it is better to see a C.A and take his advise.

ECB may follow US in levying banks

THE European banking sector could face a major levy from the ECB to pay for its massive bailout following the banking crisis.

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Question: does anyone know the french law for Capital Gains Tax?

Next yaer I am selling up and moving back to England
I have heard some nasty things about the Frech capital gains tax, does this apply to me even though my house is my main residence and not used for buisness purposes.
I have read that the new law as of 2004 states there is a 16% flat rate to pay on any gains plus an extra 10% for being a French resident for national insurance purposes.
Then I have also read that you are exempt if your house is your main residence, can anyone please put this into perspective.
Thank you all in advance.
Kevin.

Answer: Don’t run away from your problems, there will BOUND to be more or less of the same or different PROBLEMS, whereEVER you end up!

Sorry!

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Question: I lost money in the stock market in 2007, but so far I have a gain in 2009. Can I use that to offset my gains?

I lost $6,000 in the stock market in 2007. But so far in 2009 I have a $3,000 gain. They were short-term gain. My question here is, could my lost in 2007 offset my gains for 2009, so i can avoid paying tax on my capital gains since overall I am still down? why or why not? Please help, thank you.

Answer: Generally not, because of the $6,000 you lost in 2007, $3,000 was supposoed to be claimed in 2007 and the other $3,000 in 2008. You cannot keep those losses indefinately and use them whenever they become convienent to you. See a tax CPA, because depending on what you claimed for 2007 and 2008, that can have a HUGE impact on your situation

National Retail Properties, Inc. Announces 2009 Dividend Tax Status

National Retail Properties, Inc. , an equity real estate investment trust, announced today that 100% of the dividends paid to common and preferred shareholders in 2009 is classified for federal income tax purposes as a taxable distribution. Â The common stock and preferred series dividends paid per share are classified as either ordinary income or capital gains as outlined below.