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"user" is right about using the income account. Wrapping up everything into capital gains is technically wrong. But I have yet to find anyone online who claimed that the CRA questioned it. (Myself included.) The vital thing is whether you're talking about a large gain from shorting. If so, you're avoiding paying tax on 100% of the gain. In the end, those are the situations that they'll try to identify and drill into.

But james4beach is right that the CRA has no idea either. (And neither did my accountant for the past 5 years. Fail.)

I did find some article somewhere indicating that the CRA was reevaluating their accounting of short sales for institutional traders. (Can't find the source.) So it's possible that this clarification / simplification will filter down to the retail trader as well.

IT-479R is from 1984, last modified in 2002. So yea, if you shorted a stock back then, you were somewhat sophisticated and it's an indication that you are trading for income. I once saw a webinar where a professional trader talked about how no one even thought about shorting stocks during the 2001 tech bust. It just wasn't part of their toolkit, it was all long all the time so most people got slaughtered. But with the current sophistication of online trading, there is ZERO distinction between a long and a short.

Hard to believe we're being twisted into knots over tax guidance that is at least 12 years old.
 
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