Must I declare my profits from FX trading for tax purposes?

Investing as a sole proprietorship vs individual for tax purposes?

• If I wanted to set up a sole proprietorship company for my day-trading/investing in the stock market/forex... Can I write off all of the stuff I would need (a % of utilities, courses, new computer to trade with, etc) as business expenses and claim the investment revenue as Capital Gains so that 50% of it is automatically tax free right off the top, or would I have to declare it as business revenue and pay based on the full amount? If I can't offset expenses as a company but claim the earnings as capital gains then it probably isn't worth it, right?

• Answer:

  Whether your day trading/investing as "sole proprietorship vs individual" is the same for tax purposes, i.e., reporting the transactions on your personal tax return (T1 return), rather than in a corporation tax return (T2 return). If you are serious in your day trading business (proven stock knowlege, # of trading transactions daily and time involved), and if your trading has a reasonable expectation of profit (making money), you may deduct a reasonable share of expenses mentioned by you. However, that means you have to report the gain 100%, not 50%. On the other hand, if the CRA considers that your day trading has no reasonable expectation of profit, it may deny all your "business" expenses. Capital gains are generallly for stock investments with a buy and hold strategy, rather than for day traders who flips their stocks daily or within a short time (known as "adventure in the nature of trade" in taxation). Under the capital gain scenario, you may deduct your interest or margin charges for the stock purchases.