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For the past couple of years, I have taken time off so I have not filed tax returns as I had zero income. A few months ago I closed and cashed out a small mutual fund I had and received a T5008 form. It shows Proceeds of disposition or settlement amount in the amount of $5500, and cost or book value at $3720. I'm not sure what to do here. How do I file this? Do I need to as the income is under $2000, or are rules different for investment income? Any advice would be greatly appreciated.
 

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For the past couple of years, I have taken time off so I have not filed tax returns as I had zero income. A few months ago I closed and cashed out a small mutual fund I had and received a T5008 form. It shows Proceeds of disposition or settlement amount in the amount of $5500, and cost or book value at $3720. I'm not sure what to do here. How do I file this? Do I need to as the income is under $2000, or are rules different for investment income? Any advice would be greatly appreciated.

Yes, you should file a tax return every year in my opinion. You may be entitled to “free” money back from the Government like the hst/gst credit.

Generally if you’re income is below the personal exemption amount, then you won’t have to pay any tax. So you wouldn’t pay any tax on your investment gains in this case. the book value they showed you may not be the actual cost basis, but it should be close. Do you know how much you originally invested and do you have the monthly/quarterly statements from that time til now? It’s all fairly easy to complete, but can be a little confusing when doing it the first time.
 

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I agree tax returns should always be filed to get things like the GST/HST tax credit. Those that don't file are losing out on money.....period.
 

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Discussion Starter #5
Yes, you should file a tax return every year in my opinion. You may be entitled to “free” money back from the Government like the hst/gst credit.

Generally if you’re income is below the personal exemption amount, then you won’t have to pay any tax. So you wouldn’t pay any tax on your investment gains in this case. the book value they showed you may not be the actual cost basis, but it should be close. Do you know how much you originally invested and do you have the monthly/quarterly statements from that time til now? It’s all fairly easy to complete, but can be a little confusing when doing it the first time.
Thanks so much for the response, I purchased the mutual fund several years ago and I do remember it being around $3700 at the time of purchase. Unfortunately I do not have the monthly/quarterly statements. So it does not matter if the income earned is from an investment rather than employment? I'm still exempt from owing taxes on the amount totaling less than $2000?
 

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There was no income dividends. I also forgot to mention, immediately after cashing out my mutual fund, I invested all that money into a TFSA. Not sure if that makes any difference in regards to taxation. I did look a bit into studio tax and looks like a really good program. I like the fact it's 100% Canadian therefore completely tuned for the Canadian tax system.
 

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What ever is held in a TFSA is free of Canadian taxes, whether it is income or capital gains. Foreign countries that don't respect the TFSA as tax free likely will deduct their non-resident WHT from income payments.


The tax free part of a TFSA is one of the better understood parts so I'd suggest reviewing the rules for how contribution room is granted, how transactions such as contributions or deductions change the total plus the penalty for over-contribution.

https://www.taxtips.ca/tfsa/contributions.htm


Cheers
 
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