Private Wealth - tax

CFA Level III Portfolio Management
#1

After discussing her short- and long-term goals, Murray tells Virginia that he is concerned about her current tax situation. He asks her to confirm that for tax purposes, her cost base for the shares that she inherited from Richard was virtually zero. When she does, he reminds her that Canada has no inheritance tax but a capital gains tax in which one-half of the capital gain is taxable at the individual’s marginal tax rate on the disposal of the property.

Q. The nature of the tax affecting Virginia that concerns Murray is most likely described as a tax on:

  1. wealth.
  2. income.
  3. value added

Correct answer is income.

My question is: why? Could someone pls tell? It is clearly not wealth, nor value added, however, I would have classified it as “capital gains”?

Thank you!

#2

Again you have answered your own question. Capital Gains is what ?

#3

Again :slight_smile: the answer was from CFA institute…

I do not understand why this is classified as “income tax” in this case. Thank you a lot for your time.

#4

Dear,

From the context, wealth tax =0

Value added- cannot exist in personal taxes regardless of the jurisdiction

So, Murray MUST only be concerned about the

3rd option. Here it is given “income”. It could well have been “capital gains” as well. CG tax and income tax are not the same- agreed. But what it is missing is the treatment of the taxes in the jurisdiction- not mentioned anywhere( but for the fact that at disposal- read realisation, it will be 50% taxed on CG @ marginal tax rate). If I were Murray, I would also be concerned about “income tax”. Income tax is surely an annual affair. Is not it ?

#5

Thank you, dear :slight_smile:

#6

Hope it helped.