At what point does a Investor become a Trader from a tax perspective?

[lou]

Some food for thought for the weekend. At what point does a Investor become a Trader from a tax perspective? Obivously when you become a trader the IRD will tax you on your gains/loss from your share trades.

I know it comes back to intention however there can be a grey line between the two categories.

It would be good to get peoples perspective, anecdotes, and advice on the subject.

[777]

I would say if your intention was to invest but you happened to trade numerous shares many times a year then you would have trouble convincing the IRD you are not a trader. How many is "many" though is the tricky question. Length of time of each holding would come into it as well.

[lou]

I would say if your intention was to invest but you happened to trade numerous shares many times a year then you would have trouble convincing the IRD you are not a trader. How many is "many" though is the tricky question.

Agreed. The IRD look at intention but they also look at practice. You can't intend to be an investor then go around trading willy nilly.

Then question becomes when does this occur?



Length of time of each holding would come into it as well.
This would be a telling factor however a trader/investor may have a range of time frames. Some for a month or less, others may go a year or longer.

[fungus pudding]

I would say if your intention was to invest but you happened to trade numerous shares many times a year then you would have trouble convincing the IRD you are not a trader. How many is "many" though is the tricky question. Length of time of each holding would come into it as well.

As does use of the money realised. What % of income does the investment represent? - was it spent on upgrading a car, or reinvested in a higher yielding stock or other income producing asset? Was the stock you sold showing a good return on purchase - or was it bought for capital gain? History of purchasing/selling. Will reinvesting raise or lower your taxable income? None of these form hard and fast rules but are the sort of thing IRD can look at if doing an assesment. Funnily enough, they don't always believe the intention bit, so use the above test - and more - to paint their own picture of what the investmment was intended to do. e.g. it's hard to believe a low yielding stock was bought for any other reason thain cap. gain, whereas as high yielding stock (whether the investor pays tax directly or indirectly such as a PIE) is far more likely to have been acquired just for income. Then again, if an investor accumulates heaps with little on no ttrading then has a clearance sale and 'retires' from that market permanently or for a few years - he/she is probably in a better position. See how easy it is to know! :D

[Lizard]

At what point does a Investor become a Trader from a tax perspective?

At about the point they appear to make enough money from capital gains to be worth sending someone around to check through their paperwork? :p

Although I've taken steps I believe make me tax compliant, I agree that it is still unclear exactly what view IRD would choose to take. It would be interesting to hear of any cases where IRD have actually applied the rules to challenge tax paid.

[fungus pudding]

At about the point they appear to make enough money from capital gains to be worth sending someone around to check through their paperwork? :p

Although I've taken steps I believe make me tax compliant, I agree that it is still unclear exactly what view IRD would choose to take. It would be interesting to hear of any cases where IRD have actually applied the rules to challenge tax paid.

It would be interesting also to hear of any circumstances where interest claimed for share purchase has been disallowed. Normally interest on money raised to further income is deductible, naturally enough, but what if dividend doesn't cover interest? I know of a case where a commercial property was purchased - rent was showing a loss over interest paid - and rent review was long term off. IRD looked at it and disallowed interest claim as the purchaser should have known his taxable income would not increase in the foreseeable future.
Damned if I know how they even noticed it, although it was one of the AMP properties leased to Woolworths. There were heaps of them through Australasia (all AMP to Woolworths) with 40 year leases signed around 1960 and no rent reviews (obviously AMP hadn't heard of inflation back then: after all what would an insurance company know about investing?) :scared: . AMP bailed out of them all at give-away prices. So whether they went through the lot disallowing interest claims, I do not know.

[lou]

At about the point they appear to make enough money from capital gains to be worth sending someone around to check through their paperwork? :p

Sad but true.



Although I've taken steps I believe make me tax compliant, I agree that it is still unclear exactly what view IRD would choose to take. It would be interesting to hear of any cases where IRD have actually applied the rules to challenge tax paid.
Lizard how do you describe your investing/trading style?

What steps do you take to make you tax compliant?

[Lizard]

Lizard how do you describe your investing/trading style?

My general style is contrarian/value based investing. I like to run a diversified, balanced portfolio of mostly dividend-producing stocks with some growth stocks. I also enjoy ferreting out super-cheap "up-and-coming" spec stocks, which I tend to put very small amounts into while I decide if I like them. Sometimes I will take a quick profit or loss - probably typically 10 small trades a year of less than 12 months - but otherwise typical holding period is probably around 3 years.


What steps do you take to make you tax compliant?

I have a portfolio in my own name and one estate trust for which I am trustee. My intention when I started out was to educate myself as an investor. As I sought out the "best way to invest" and accumulated more funds, I tried many different things - began to make more money and found myself making more transactions. I wanted to hold lots of investments to learn as fast as possible, so only tended to invest the minimum in each one. At the point where I added up my transactions and found I'd done 35-40 in each portfolio for the year, I decided my behaviour was starting to resemble trading. At that point, I did not think that actually trading shares was going to make me the 50% more in returns that I would have needed to make at the time to be worth classing myself as a trader. Nor did I consider it appropriate for the Estate to be trading. So I sat down and wrote a couple of documents, outlining goals, strategy, and method.

I also split my own portfolio into a large investment pile and a smaller trading pile and tried to separate the two by using different brokers at time of purchase to show my intention. I started a hand-written trading log to record trades - if kept up to date, it should be a reliable record of my purchase intention. I also wrote a letter to IRD asking them to confirm that it would be acceptable to separate the portfolios in this way - to which of course I received an "it's acceptable, but would still be down to the circumstances..." type response.

For my investing portfolio, my procedures state that I re-balance once every 3 months and outline the procedure to be used in decision making on buying and selling. Since I wrote it 5 years ago, it is probably about time I pulled the documents out and updated and checked them. I now tend to do a lot less transactions in the Estate portfolio and mostly driven by re-balancing.

Obviously, I also keep spreadsheet records as I go of all trading transactions to record appropriately for tax. These days, the majority of trades occur in FIF regime shares, but it is not clean cut - I have FIF shares in my investment portfolio and some exempt shares in trading where I pay tax on profits... however, I think I would be reluctant to ever claim a loss from this trading while making money on investment shares - it would seem provocative!

I think other things that people could consider doing would be to use a professional accountant and/or Sharesight service to make sure they are seen to be more likely to be paying correct tax. Other things I think IRD consider are the extent to which a person is spending time on trading versus working at another job and the extent to which they are living on profits from the sale of shares... so something to bear in mind when considering retiring early. Right now, I am not working and our family is at one of the more expensive stages - if I do not get back into work shortly, I may need to look closely at what I am withdrawing money from the market for and ensure it is not investment gains that are paying the grocery bills. Or move more funds into Trading and pay tax accordingly.

Having written all this, I have no idea of the odds of me being audited either now or in the future and therefore the extent to which this may seem a waste of effort to some. Nor do I know what stance IRD would choose to take. All my precautions are based on making my best effort to pay tax fairly while not over-paying or under-managing my investments.

[BIRMANBOY]

One faced with this situation might be advised to consider opening separate a/c's for the purposes of separating all trading activities as opposed to investment. We have 3 sep a/c with DB for example (all dif GST registrations). So one is my personal a/c which I was going to use for some trading but have not gotten around to, one investment using my Ltd Company and the last as a partnership with my partner for some joint investments. The benefit as long as you dont "muddy" the waters is that its readily apparent which is doing what. Its quite simple to register as a company and the only down side is that running a company does have more accounting stuff to be done at the end of year etc. I guess you also might consider the "reasonableness" re IRD of balancing upwards all the time in an investment portfolio..the occasional balancing "downwards" would make your position much stronger in any questionable trades/sorry rebalances.

DISCLAIMER and edit...what I need to mention is that as a Company there is no such thing as NON taxable cap gains which of course you can utilize as an individual if its for investment as opposed to trading. As a company, cap gains are booked into a separate a/c which is separated from other trading activities. If your company is specifically set up as a share and bond vehicle then the cap gains are treated as regular trading profit or loss as the case may be. If you add your share stuff into your pre-existing co (like me) then the cap gains from shares are booked but not realized until either you wind up company or presumably decide to add them in to yearly a/c. In any case please talk to your accountant as to benefits /downside etc.

[CJ]

A couple of points:
- unlike property, there is no tainting. Just because you hold one share for trading, does mean the hold portfolio (or all associated portfolios) are tainted.
- it is on a share by share basis.

As such, diferent portfolios is not needed but is good practice.

The thing I struggle with as a buy and hold investor, is how can I buy a share like Xero or DIL (both small parts of my portfolio at purchase price), Obviously growth, not dividend stocks. However, they do form part of a diversified portfolio. And I fully expect them to become good dividends stocks at some stage - DIL in the next year or so and Xero in about 3-5 years.

Or how about RYM - dividend yeild is pathetic but combine with Growth, a good stock as part of a diversified portfolio. Even some of the utilities I own pay less than the interest rate on my margin account.

I am obviously not buying for a quick, or even mid term trade but if you look at the yield I get, potentially you could argue at least 50% are not bought solely for yield.

[lou]

A couple of points:
- unlike property, there is no tainting. Just because you hold one share for trading, does mean the hold portfolio (or all associated portfolios) are tainted.
- it is on a share by share basis.

As such, diferent portfolios is not needed but is good practice.

Agreed separate portfolios are good but not necessary.




The thing I struggle with as a buy and hold investor, is how can I buy a share like Xero or DIL (both small parts of my portfolio at purchase price), Obviously growth, not dividend stocks. However, they do form part of a diversified portfolio. And I fully expect them to become good dividends stocks at some stage - DIL in the next year or so and Xero in about 3-5 years.

Or how about RYM - dividend yeild is pathetic but combine with Growth, a good stock as part of a diversified portfolio. Even some of the utilities I own pay less than the interest rate on my margin account.

I am obviously not buying for a quick, or even mid term trade but if you look at the yield I get, potentially you could argue at least 50% are not bought solely for yield.

It should not matter too much which stocks you have in your portfolio as long as you can justify you bought them on the basis that they had increasing EPS and that will fund future dividends.

I would be more concerned with how many trades you do a year (entering or leaving a share) and the average time frame you are in the share.

In theory it should not matter if you fund your investing through equity or debt when it come to determining if you are investor or trader. However in practice the IRD are more likely to say you a speculating if you have bought on margin. Secondly if you are claiming loss and booking capital gains you maybe more likely to get target for an audit.

[Lizard]

My understanding is that an expectation of capital appreciation does not in itself make you a trader. Investing in a mixture of growth assets to protect your savings against inflation is still investment. I don't think it would be queried as part of a balanced portfolio that also included some taxable income.

[fungus pudding]

My understanding is that an expectation of capital appreciation does not in itself make you a trader. Investing in a mixture of growth assets to protect your savings against inflation is still investment. I don't think it would be queried as part of a balanced portfolio that also included some taxable income.

Which raises an intersting question: When Labour eventually get back in, will a portfolio still need to be split into two for tax - where capital gains tax apply to buy and sell equities, and another where income tax will apply to capital gains. Or in other words, will intention still be a test for taxation?

[BIRMANBOY]

It all comes down to as others have said..your intent. If there is an audit and you can argue your point that any cap gains was not from purposefull "trading" but merely a fortunate result of canny picking and market forces and now you want to transfer the funds into a better vehicle then you have a strong case. If all of your "balancing" is always on the plus side then your arguement might be somewhat weakened, and could be challenged immediately if for example it was with the same stock multiple times. Also as others have said time of ownership is going to be an indicator of intent. You buying Xero or Dil or Rym would seem to me (as a common sense observation not necessarily informed) to definitely fall into the category of "not trading". Fact that there is not much yield is sort of a side issue but they were purchased for long term growth is the important criteria. Tax is withheld on dividends and any cap gain if and when you finally sell is result of long term investment not trading for profits. If you find yourself returning to the same share time and time because its making you money in the spreads its time to call yourself a trader of course. One of the shares I would like for trading has been TEL. I could definitely see some point in trading in and out of that .
A couple of points:
- unlike property, there is no tainting. Just because you hold one share for trading, does mean the hold portfolio (or all associated portfolios) are tainted.
- it is on a share by share basis.

As such, diferent portfolios is not needed but is good practice.

The thing I struggle with as a buy and hold investor, is how can I buy a share like Xero or DIL (both small parts of my portfolio at purchase price), Obviously growth, not dividend stocks. However, they do form part of a diversified portfolio. And I fully expect them to become good dividends stocks at some stage - DIL in the next year or so and Xero in about 3-5 years.

Or how about RYM - dividend yeild is pathetic but combine with Growth, a good stock as part of a diversified portfolio. Even some of the utilities I own pay less than the interest rate on my margin account.

I am obviously not buying for a quick, or even mid term trade but if you look at the yield I get, potentially you could argue at least 50% are not bought solely for yield.

[BIRMANBOY]

Hypothetical since Labour is history and will well "labour" to get back into power.:)
Which raises an intersting question: When Labour eventually get back in, will a portfolio still need to be split into two for tax - where capital gains tax apply to buy and sell equities, and another where income tax will apply to capital gains. Or in other words, will intention still be a test for taxation?

[CJ]

Which raises an intersting question: When Labour eventually get back in, will a portfolio still need to be split into two for tax - where capital gains tax apply to buy and sell equities, and another where income tax will apply to capital gains. Or in other words, will intention still be a test for taxation?No. I would have thought you would pay tax on all dividend when received and pay the CGT on all shares when you sold them regardless of whether you held for income or capital gain. That is how it works overseas.

Argulably if the income tax and CGT tax rate are different, IRD could argue (as they do now) that your capital gains, are actually income. I dont know if this is prevalent overseas. I know that PE funds treat their carried interest as 'capital' when it is clearly the income from their efforts - admit-ably normally a huge amount at the close of the fund.

[CJ]

It all comes down to as others have said..your intent. If there is an audit and you can argue your point that any cap gains was not from purposefull "trading" but merely a fortunate result of canny picking and market forces and now you want to transfer the funds into a better vehicle then you have a strong case. If all of your "balancing" is always on the plus side then your arguement might be somewhat weakened, and could be challenged immediately if for example it was with the same stock multiple times. Also as others have said time of ownership is going to be an indicator of intent. You buying Xero or Dil or Rym would seem to me (as a common sense observation not necessarily informed) to definitely fall into the category of "not trading". Fact that there is not much yield is sort of a side issue but they were purchased for long term growth is the important criteria. Tax is withheld on dividends and any cap gain if and when you finally sell is result of long term investment not trading for profits. If you find yourself returning to the same share time and time because its making you money in the spreads its time to call yourself a trader of course. One of the shares I would like for trading has been TEL. I could definitely see some point in trading in and out of that .That is my view too. The concern, esp for Xro is if I see before they start paying a dividend, it makes it hard to argue I bought for 'income'. Having said that, I dont think IRD has knocked on the door of every XRO shareholder who has sold to date.

[winner69]

Having been through an audit (was nearly 10 years ago) and lost several arguments and having inocme reassessed with the subsequent penalties here is a couple of points that I experienced -

Mr Winner - we note that you hold some shares that have and probably never will pay a dividend - so the intent really was to make a capital gain wasn't it Mr Winner
Mr Winner - noble intention of you protecting your capital by selling shares when they start to lose value and rebalancing your portfolio when you become overweight in one some shares ..... but Mr Winner more than60 trades (buys and sells counted separately) a year is more than we would expect from someone whose main aim is generate income (tax paid on this) from a portfolio.
Sorry Mr Winner you can't have it both ways - if you are a 'trader' you can't be an 'investor' as well .... and yes Mr Winner you are seemed to be a trader and until you can convince us otherwise will always be one.


Even with professional advice I lost the battle. maybe the record keeping was all the best but I did declare and pay all the dividends I got so I didn't feel guilty but was pissed at the penalties

This was about the time when things could double (or half) pretty quickly which may have been the motivation for chasing a few like me. I think I got noticed when they went through an IPO and followed up those who sold rather early in the piece

These days Mr Winner doesn't have any shares in his name - they all go through a company and a family trust with proper record keeping and intent etc but sometimes I sometime wonder if a 'capital' account is really a 'capital' account. My reasoning is that if a tax agent files your tax returns that'll keep the IRD away

[fungus pudding]

No. I would have thought you would pay tax on all dividend when received and pay the CGT on all shares when you sold them regardless of whether you held for income or capital gain. That is how it works overseas.



But if all gains are taxed at the CGT rate, then it will need to be set at the highest income tax rate - currently 33% - or those who currently pay income tax on gains will be getting off too light to suit a labour govt.

[BIRMANBOY]

Thats very interesting..that they would say you cant be both a trader and an investor. I wonder if that is still the interpretation? Things may have changed in 10 years. If it is, that would suggest that you really are dodging bullets keeping all of your purchases in one portfolio. it would seem better to totally ringfence them by forming sep entity with diff gst number etc to bolster your position.
Having been through an audit (was nearly 10 years ago) and lost several arguments and having inocme reassessed with the subsequent penalties here is a couple of points that I experienced -

Mr Winner - we note that you hold some shares that have and probably never will pay a dividend - so the intent really was to make a capital gain wasn't it Mr Winner
Mr Winner - noble intention of you protecting your capital by selling shares when they start to lose value and rebalancing your portfolio when you become overweight in one some shares ..... but Mr Winner more than60 trades (buys and sells counted separately) a year is more than we would expect from someone whose main aim is generate income (tax paid on this) from a portfolio.
Sorry Mr Winner you can't have it both ways - if you are a 'trader' you can't be an 'investor' as well .... and yes Mr Winner you are seemed to be a trader and until you can convince us otherwise will always be one.


Even with professional advice I lost the battle. maybe the record keeping was all the best but I did declare and pay all the dividends I got so I didn't feel guilty but was pissed at the penalties

This was about the time when things could double (or half) pretty quickly which may have been the motivation for chasing a few like me. I think I got noticed when they went through an IPO and followed up those who sold rather early in the piece

These days Mr Winner doesn't have any shares in his name - they all go through a company and a family trust with proper record keeping and intent etc but sometimes I sometime wonder if a 'capital' account is really a 'capital' account. My reasoning is that if a tax agent files your tax returns that'll keep the IRD away

[h2so4]

My reasoning is that if a tax agent files your tax returns that'll keep the IRD away

Yes I concur.

Audits are simple things. You get a letter which sets out what years of accounts they wish to audit, then you are subjected to an interview where you are out numbered and then they do a reassesment which you pay. Mine was for seven years during which time I had suffered a fire so records were lost which complicated things. The whole thing took a year. The reassesment was aprox $1000 which I happily paid, now I use a tax accountant and keep my head down. :)

[CJ]

But if all gains are taxed at the CGT rate, then it will need to be set at the highest income tax rate - currently 33% - or those who currently pay income tax on gains will be getting off too light to suit a labour govt.I think in Australia CGT is at the top tax rate but you get some for of discount/index to allow for the inflation factor. Could be wrong.

Anything more complicated than treating capital gains as income is probably a $1.5B computer project away - IRD system is struggling under WFF apparently.

[POSSUM THE CAT]

CJ unless the rules have changed recently in Australia if you have held the shares for more than twelve months you pay tax at your marginal tax rate on half the capital gain. If you have not held for twelve months you pay capital gains tax on the full amount of capital gain, at your marginal tax rate. Left Australia mid 2006

[Lizard]

Thanks for the insights, Winner - really good to hear from someone who has actually been audited rather than these endless circular discussions we have about what "should be okay".

[janner]

" IRD system is struggling under WFF apparently. "

So are honest tax payers..

[lou]

Thanks Winner, your post was exactly what I was hoping to get out of this tread. If possible I would like to ask a couple further questions of your experience.


Having been through an audit (was nearly 10 years ago) and lost several arguments and having inocme reassessed with the subsequent penalties here is a couple of points that I experienced -

Mr Winner - we note that you hold some shares that have and probably never will pay a dividend - so the intent really was to make a capital gain wasn't it Mr Winner
Mr Winner - noble intention of you protecting your capital by selling shares when they start to lose value and rebalancing your portfolio when you become overweight in one some shares ..... but Mr Winner more than60 trades (buys and sells counted separately) a year is more than we would expect from someone whose main aim is generate income (tax paid on this) from a portfolio.
Sorry Mr Winner you can't have it both ways - if you are a 'trader' you can't be an 'investor' as well .... and yes Mr Winner you are seemed to be a trader and until you can convince us otherwise will always be one.



Over how long a period did they deem you to be trading?
More than 60 trades a year, was this one year or an average over multiple years?
How many shares were you trading in your portfolio?
When you were trading shares were you buying and sell your total position? or were you buy and selling part of positions?
Has being audited affected the way you trade the markets? How would you describe your investment style pre audit and post audit?

[fungus pudding]

CJ unless the rules have changed recently in Australia if you have held the shares for more than twelve months you pay tax at your marginal tax rate on half the capital gain. If you have not held for twelve months you pay capital gains tax on the full amount of capital gain, at your marginal tax rate. Left Australia mid 2006

I think it's still the same in Australia. But at what stage is a capital gain considered income and taxed at the full marginal tax rate? Seems to me that the IRD and/or the tax payer will still have the same difficulty in knowing what tax rate to apply (whichg portfolio to place shares in).









0.

[BIRMANBOY]

As Lizard said there is a lot of talk and not much hard evidence in this thread. Some experience (older) but obviously limited to space and time in making the post. For anyone who is unsure of where they stand and who wants clarification it might be better to actually contact IRD and make an appointment to discuss your specific details. I have found previously that IRD are happy to help in clarifying tax situations. Also another alternative is working with your accountant, who should be able to steer you on the correct course as long as they are fully qualified and up to speed.

[winner69]

Lou

They went back several years and deemed me a trader over that period ......and into the future. It was about 60 transactions in one year they focused on. Never have many stocks at any particular time and most transactions would have been the total position.

Did it change the way I invest? Not really .....still hold while things are going up and sell when things start going down and collect divvies along the way but divvies are not generally the main motivation. That's the bulk of the current activity and all these go through a capital account in the family trust and a company

In addition I give myself (company) some pocket money to speculate with and keep quite about any gains or losses.

You need to do what you think is best or what your conscience allows you. Liz seems to have the right disciplined approach and prob covers all bases to protect herself.

Birman ...... I wouldn't ask IRD direct for advise ....bad idea in my books. Rather get a. Professional to advise or discuss on your behalf

I could easily file my own tax returns but use an accountant as a tax agent ....theory being it gives the return some credibility (of course) and IRD probabably won.t look too hard at it. For a few hundred bucks money well spent

My experience was ten years ago so things may well have changed

.

[percy]

Thanks for the insights, Winner - really good to hear from someone who has actually been audited rather than these endless circular discussions we have about what "should be okay".

Yes,thank you Winner69.

[CJ]

It was about 60 transactions in one year they focused on. Never have many stocks at any particular time and most transactions would have been the total position.

Did it change the way I invest? Not really .....still hold while things are going up and sell when things start going down and collect divvies along the way but divvies are not generally the main motivation. While "trader" might not be the right word for you, from what you have said I think you would have a hard time arguing that you hold on capital account.

[BIRMANBOY]

Just need to clarify an earlier post I made regards utilizing a company format. What I did not add was that as an individual you can be excused cap gains tax by investing as opposed to trading but using a company format is treated differently. if you have a cap gains it goes into a separate a/c on the company books if its a pre-existing company formed for your "normal business". Since you are trading as a company it is actually profit and will be taxed as such at some point (each year if your co is specifically set up for share trading) My understanding is that if you wound up company and were in a "no profit" scenario then the cap gains could be offset against the loss and there would be no tax due. However if there was a profit from regular trading then the Cap gains a/c will be added in to be taxed as per normal. I guess as a company might be other benefits such as home office, computer, memberships etc. etc. but would suggest strongly talk to accountant about intricacies. Apologies for earlier post..I will edit it accordingly.

[winner69]

I know cj ........that's the issue

Would say unless one buys and holds through good and bad and leaves things in the bottom draw forever you probably are a 'trader' of sorts .......and that's not fair or equitable.

I appreciate that essentially I haven't changed my approach but I don't see myself as a trader and my tax agent doesn't disagree (though acting on instructions) so I take that risk at the mo.

If things keep going up I can go long periods without selling and only buying ......but when the line on the chart doesn't.t look too flash I sell and sometimes (like a few years ago) that can cause a flurry of activity ......compounded when one starts buying back. I call this capital protection

My tax agent has clients who run both capital and revenue accounts but she does say that they are pretty active traders and the capital account their retirement money

It is not black and white but I wouldn't voluntary call myself a trader unless I was buying selling every day or week or because you feel you have to ..... Prob not good advice but I think chances of getting caught if guilty are pretty slim anyway

Noe we have debated in public IRD prob going to run a check on who sells their Mighty River shares in the first week ..... My excuse the wife bought them in my name without my permission

[CJ]

I wouldn't voluntary call myself a trader unless I was buying selling every day or week I think that was my point. I dont think it is as simple as I am not a trader as the test isn't "are you a trader". If you investment strategy is to buy low and sell high, then you are investing for capital gains and therefore it isn't a capital gain, it is an income gain (screwed logic I know).

The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.

[BIRMANBOY]

Well not as clear cut as that.. I buy for dividends...really, really, promise-not pretending. However I try and buy when those dividend producers are low SP. Every now and then I end up with cap gain as well(unrealized since I very rarely sell). There are considerable numbers of investors who supplement super and savings with dividends and prefer to have steady income stream as opposed to lump sum windfalls. At some point those cap gains will be realized I suppose (if they are still there) but not for number of years would be my guess.
I think that was my point. I dont think it is as simple as I am not a trader as the test isn't "are you a trader". If you investment strategy is to buy low and sell high, then you are investing for capital gains and therefore it isn't a capital gain, it is an income gain (screwed logic I know).

The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.

[Jay]

The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.


Exactly CJ, you are not going to buy high and sell low beacuse there is a 10% yield.
I think the easierst and maybe the fairest is somethong along the lines of time holding a particular asset , whether it be a share a piece of art or a property.

[fungus pudding]

The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.


Not everyone. I buy for income and have no intention of selling.

[STRAT]

At about the point they appear to make enough money from capital gains to be worth sending someone around to check through their paperwork? :p
That about sums it up Liz