What makes a Trader v Investor

[dubya]

When completing the online income tax return, one of the questions asked by IRD is:

(Has the entity) "repurchased, redeemed or cancelled shares"

I assume that the IRD is trying to see if there is some sort of pattern of selling and buying? – hence trading.

I didn’t tick the box because I haven’t repurchased, redeemed or cancelled shares this financial year.
That might not always be the case in the future though.

I consider myself an investor and not a trader.

I’ve always been of the understanding that if I buy shares to ‘derive assessable income’ any subsequent capital gain is tax free. But there obviously has to be some sort of threshold and/or cross over point, as perceived by the IRD, whereby an investor becomes a trader and therefore their capital gains are taxed.

Does anyone have any experience with IRD as to what IRD consider to be a pattern of trading?
Is there some sort of magic figure IRD use when a person buys and sells the same stock in a financial year?
Is it prudent to keep a record of why buying/selling decisions are made? (and would it make any real difference when debating the point with IRD?)

[see weed]

When completing the online income tax return, one of the questions asked by IRD is:

(Has the entity) "repurchased, redeemed or cancelled shares"

I assume that the IRD is trying to see if there is some sort of pattern of selling and buying? – hence trading.

I didn’t tick the box because I haven’t repurchased, redeemed or cancelled shares this financial year.
That might not always be the case in the future though.

I consider myself an investor and not a trader.

I’ve always been of the understanding that if I buy shares to ‘derive assessable income’ any subsequent capital gain is tax free. But there obviously has to be some sort of threshold and/or cross over point, as perceived by the IRD, whereby an investor becomes a trader and therefore their capital gains are taxed.

Does anyone have any experience with IRD as to what IRD consider to be a pattern of trading?
Is there some sort of magic figure IRD use when a person buys and sells the same stock in a financial year?
Is it prudent to keep a record of why buying/selling decisions are made? (and would it make any real difference when debating the point with IRD?)

You should keep records. I have records of every trade done since starting 22 years ago.

[ratkin]

It is such a gray area. There must be 1000s of investors who sold shares when covid started, then bought some back near the bottom. They were not really trading, just using common sense and trying to avoid potential disaster.

would be pretty harsh for the IRD to come down on the covid sellers/ rebuyers, unless of course they are normally buying in and out of the same stock

[blackcap]

When completing the online income tax return, one of the questions asked by IRD is:

(Has the entity) "repurchased, redeemed or cancelled shares"

I assume that the IRD is trying to see if there is some sort of pattern of selling and buying? – hence trading.

I didn’t tick the box because I haven’t repurchased, redeemed or cancelled shares this financial year.
That might not always be the case in the future though.

I consider myself an investor and not a trader.

I’ve always been of the understanding that if I buy shares to ‘derive assessable income’ any subsequent capital gain is tax free. But there obviously has to be some sort of threshold and/or cross over point, as perceived by the IRD, whereby an investor becomes a trader and therefore their capital gains are taxed.

Does anyone have any experience with IRD as to what IRD consider to be a pattern of trading?
Is there some sort of magic figure IRD use when a person buys and sells the same stock in a financial year?
Is it prudent to keep a record of why buying/selling decisions are made? (and would it make any real difference when debating the point with IRD?)

Isn't that question related to the entity that you are filling in the tax return for? Ie if you are doing a tax return for a company, lets call it Dubya Ltd, then the IRD are wanting to know if Dubya LTD has repurchased, redeemed or cancelled shares. I don't think it has anything to do with share trading per-se. But I could be wrong. From memory this question gets asked on one of my entities that I complete IRD returns for but that entity does not even own a share in anything.

[DNM]

(Has the entity) "repurchased, redeemed or cancelled shares" - I think this might be applicable to shares in your own company rather than shares you've bought or sold?

[King1212]

Stuff IRD..go n tell them how we felt during feb, March and April 2020.

They won't even care that your balls were sweating....night n day...

I can even smell it till now...yum....lol

[dubya]

Isn't that question related to the entity that you are filling in the tax return for? Ie if you are doing a tax return for a company, lets call it Dubya Ltd, then the IRD are wanting to know if Dubya LTD has repurchased, redeemed or cancelled shares. I don't think it has anything to do with share trading per-se. But I could be wrong. From memory this question gets asked on one of my entities that I complete IRD returns for but that entity does not even own a share in anything.

(Has the entity) "repurchased, redeemed or cancelled shares" - I think this might be applicable to shares in your own company rather than shares you've bought or sold?

Yes you're both quite right. Thanks. I had a bit of a brain fade I think. I saw the word 'shares' and automatically went to listed shares.....then started to think about trading.......then started to think about losing 33% of capital gains.

Stuff IRD..go n tell them how we felt during feb, March and April 2020.

They won't even care that your balls were sweating....night n day...

I can even smell it till now...yum....lol

Yes I felt pretty sick at the time too but OCA @ .44 & .56, GNE @ 2.01, and ARG @ .95 makes the sick feeling I had then, more of a happy fading memory now lol

[Snow Leopard]

Investor:
Someone who buy and holds for a long time collects the dividends and makes himself rich.

Trader:
Someone who buys and sells shares every five minutes on whim and makes his broker rich.

[JBmurc]

Investor:
Someone who buy and holds for a long time collects the dividends and makes himself rich.

Trader:
Someone who buys and sells shares every five minutes on whim and makes his broker rich.

think you mean "Day Trader" .... I've been trading shares for 15yrs ...yes I don't hold for dividends but capital gain .. some shares are held for years some for weeks
I like the ability to write off costs against my tax or some years collect tax losses = tax credit .. Trader = freedom IMHO

[blackcap]

think you mean "Day Trader" .... I've been trading shares for 15yrs ...yes I don't hold for dividends but capital gain .. some shares are held for years some for weeks
I like the ability to write off costs against my tax or some years collect tax losses = tax credit .. Trader = freedom IMHO

An investor can also write off costs against their other income (dividend). No difference as to the tax treatment there. But as an investor I do not pay tax when I do sell my shares at a profit. Rather be an investor than a trader.