Investors vs Share dealers

Question 1

What is the difference between an investor and a share dealer?

Answer 1

An investor is someone who buys shares as capital assets in order to reap the dividends but a share dealer is someone who buys shares and earns income simply by trading with the value of shares

Question 2

what happens when you hold a share for 3 years or longer

Answer 2

Section 9C?
- once a share has been held for 3 years, it is deemed capital in nature on that date of 3 years
- a recoupment of any opening stock deductions must occur
- however this doesn’t apply to shares that are held in non- resident companies

Question 3

What are the tax implications of a Share buyback?

Answer 3

According to Section idk
- A share buyback is considered a Dividend in Specie and therefore will experience dividends Tax

Question 4

What things should you consider when someone is a share dealer?

Answer 4

• their shares could be seen as trading stock
• unless it has been held for 3 years
• they can deduct interest under section 24J if the shares are trading stock
• the interest deduction would have been disallowed if they were trying to earn dividend income, under section 23(f)

Question 5

What considerations are relevant if a share trader has a share that is capital in Nature?

Answer 5

• any interest incurred can be capitalized to the shares while it is capital in nature (maybe only a 3rd though?) (added to the base cost l) (look at para 20(3)(a)(ii)
• if it is sold, it is considered a CGT disposal event
• any brokerage fees can also be added to the base cost

Question 6

What is securities transfer tax and when does it apply?

Answer 6

• it is a tax charged on the transfer of shares
• the rate at which it is charged is 0.25%