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Proving income when all you have are investments?

stinkynuts

Super
Jan 4, 2005
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Suppose you have $1M and on average you're making $80,000 a year in investments. However you are just leaving the investments and not cashing in anything. Even though you are making money, you are not showing any income. This makes it impossible to take out a loan, say a mortgage.

If I wanted to show my income, I would have to cash out all my investments at the end of the year, and show a capital gains of $80,000. This seems ridiculous.

Is there any easy way to show that I have a steady stream of income though investments only? Or is this impossible, since investments are no guarantee of steady income.

I could be maiking $80,000 each year for five years in a row, and not cash in anything, and I would be showing no income, so the banks would not lend me money.

I guess if I put all money into dividend yielding stocks, I could, but I don't want to do that. Any suggestions?
 

bazokajoe

Well-known member
Nov 6, 2010
9,250
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Just show your statements. If all your investments are in registered plans then you won't have any tax receipts to show(until you cash out). If they are unregistered then you would have received tax slips, for dividend income, in Jan/Feb to file with the CRA and thus have proof of income.
 

danmand

Well-known member
Nov 28, 2003
46,353
4,776
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Suppose you have $1M and on average you're making $80,000 a year in investments. However you are just leaving the investments and not cashing in anything. Even though you are making money, you are not showing any income. This makes it impossible to take out a loan, say a mortgage.

If I wanted to show my income, I would have to cash out all my investments at the end of the year, and show a capital gains of $80,000. This seems ridiculous.

Is there any easy way to show that I have a steady stream of income though investments only? Or is this impossible, since investments are no guarantee of steady income.

I could be maiking $80,000 each year for five years in a row, and not cash in anything, and I would be showing no income, so the banks would not lend me money.

I guess if I put all money into dividend yielding stocks, I could, but I don't want to do that. Any suggestions?
What size loan are you talking about. If you have $ 1M in the bank (stock broker) account, they will loan you money as per the margin.
 

stinkynuts

Super
Jan 4, 2005
7,429
2,135
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Just show your statements. If all your investments are in registered plans then you won't have any tax receipts to show(until you cash out). If they are unregistered then you would have received tax slips, for dividend income, in Jan/Feb to file with the CRA and thus have proof of income.
I see, that makes sense.
 

stinkynuts

Super
Jan 4, 2005
7,429
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What size loan are you talking about. If you have $ 1M in the bank (stock broker) account, they will loan you money as per the margin.
Okay, I thought there had to be some collateral. Just having money in the bank, I thought, wouldn't be enough.
 

fall

Well-known member
Dec 9, 2010
2,745
680
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Suppose you have $1M and on average you're making $80,000 a year in investments. However you are just leaving the investments and not cashing in anything. Even though you are making money, you are not showing any income. This makes it impossible to take out a loan, say a mortgage.

If I wanted to show my income, I would have to cash out all my investments at the end of the year, and show a capital gains of $80,000. This seems ridiculous.

Is there any easy way to show that I have a steady stream of income though investments only? Or is this impossible, since investments are no guarantee of steady income.

I could be maiking $80,000 each year for five years in a row, and not cash in anything, and I would be showing no income, so the banks would not lend me money.

I guess if I put all money into dividend yielding stocks, I could, but I don't want to do that. Any suggestions?
What do you live on? If you are making $80,000 capital gain a year and have $1M in assets (other than your home), and not extremely thrifty person, you must spend at least $60K a year (if you live along and have mortgage-free house) or more (if you rent or pay mortgage or have a family). So, you do have an income to cover your expenses (unless, of course, you have a stash of cash).
 

stinkynuts

Super
Jan 4, 2005
7,429
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What do you live on? If you are making $80,000 capital gain a year and have $1M in assets (other than your home), and not extremely thrifty person, you must spend at least $60K a year (if you live along and have mortgage-free house) or more (if you rent or pay mortgage or have a family). So, you do have an income to cover your expenses (unless, of course, you have a stash of cash).
yes, but I don't report it, it's cash.
 

K Douglas

Half Man Half Amazing
Jan 5, 2005
26,135
6,340
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Room 112
Suppose you have $1M and on average you're making $80,000 a year in investments. However you are just leaving the investments and not cashing in anything. Even though you are making money, you are not showing any income. This makes it impossible to take out a loan, say a mortgage.

If I wanted to show my income, I would have to cash out all my investments at the end of the year, and show a capital gains of $80,000. This seems ridiculous.

Is there any easy way to show that I have a steady stream of income though investments only? Or is this impossible, since investments are no guarantee of steady income.

I could be maiking $80,000 each year for five years in a row, and not cash in anything, and I would be showing no income, so the banks would not lend me money.

I guess if I put all money into dividend yielding stocks, I could, but I don't want to do that. Any suggestions?
When you say you can be making $80,000 per year for five years in a row I'm assuming you're referring to unrealized gains. Otherwise you'd be showing income upon sale. I guess my question would be this - why not sell enough stock to show $80,000 in income instead of moving money into income yielding stocks and paying higher taxes?
 

K Douglas

Half Man Half Amazing
Jan 5, 2005
26,135
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Room 112
Don’t you receive T3 and T5 slips?
Those would only be issued if there are income distributions from his investments - interest, dividends, reinvested capital gains. He could be holding investments that don't pay anything
 

WULA

Well-known member
Aug 12, 2012
604
384
63
It's a GOOD problem. Enjoy it.

You have lots of collateral, borrow from your broker or bank. IF you have cash, just spend it !
 

stinkynuts

Super
Jan 4, 2005
7,429
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Those would only be issued if there are income distributions from his investments - interest, dividends, reinvested capital gains. He could be holding investments that don't pay anything
Yes, I believe that is for capital gains, in wihich you show how much money you actually realized. Say you cash out $1,080,000, and you make $80,000. since you bought the stock for $1M.


That is different from holding onto $1,0800,000, when you made $80,000 but did not cash out. Even though you made $80,000, it's only on paper.

This is exactly the same thing as a house. Let's say one year, it went from being worth $1,000,000 to $1,100,000. You made $100,000, but since you did not realize the gains by selling it, you don't fill out the T form. Only when you sell the house do you show that you made $100,000 in capital gains.

In order to show $80,000 in capital gains, I would have to sell the whole $1M in stock.

But as bazookajoe pointed out, I think you would just show your bank statements to show the increase in value.
 

Malibuk

Well-known member
Jan 9, 2017
1,127
270
83
Suppose you have $1M and on average you're making $80,000 a year in investments. However you are just leaving the investments and not cashing in anything. Even though you are making money, you are not showing any income. This makes it impossible to take out a loan, say a mortgage.

If I wanted to show my income, I would have to cash out all my investments at the end of the year, and show a capital gains of $80,000. This seems ridiculous.

Is there any easy way to show that I have a steady stream of income though investments only? Or is this impossible, since investments are no guarantee of steady income.

I could be maiking $80,000 each year for five years in a row, and not cash in anything, and I would be showing no income, so the banks would not lend me money.

I guess if I put all money into dividend yielding stocks, I could, but I don't want to do that. Any suggestions?
Even if you did sell and realize an $80k capital gain, so what?
That is not a steady repeatable income that the bank would be interested in.

Banks are seeing their own stocks drop a lot so I can`t see them considering any stocks as much of a collateral.
 

farquhar

Well-known member
Jan 25, 2019
993
743
93
Suppose you have $1M and on average you're making $80,000 a year in investments. However you are just leaving the investments and not cashing in anything. Even though you are making money, you are not showing any income. This makes it impossible to take out a loan, say a mortgage.

If I wanted to show my income, I would have to cash out all my investments at the end of the year, and show a capital gains of $80,000. This seems ridiculous.

Is there any easy way to show that I have a steady stream of income though investments only? Or is this impossible, since investments are no guarantee of steady income.

I could be maiking $80,000 each year for five years in a row, and not cash in anything, and I would be showing no income, so the banks would not lend me money.

I guess if I put all money into dividend yielding stocks, I could, but I don't want to do that. Any suggestions?
Stinkynuts, I had a family member who recently got a Home Equity Line of Credit; the majority of her income is from an investment portfolio, plus some CPP and a company pension.

In order to prove the investment income, the Bank needed to see the last 2 years Tax Returns and accompanying Notice of Assessment. The Bank also needed to see a recent statement of her Brokerage account in order to prove the investments exist.

If the income was not reported on a T1 General Tax Return, it can't be used.
 

fall

Well-known member
Dec 9, 2010
2,745
680
113
yes, but I don't report it, it's cash.
Then this is a problem. Limited access to credit is one of the unfortunate effects of income under-reporting and tax avoidance. I think, you have 2 choice: (i) realise your capital gains and pay taxes (it is only half of the regular rate) or (2) open a margin account with your stock brokerage and borrow from it (but the rate will a few % above prime)
 

farquhar

Well-known member
Jan 25, 2019
993
743
93
Yes, I believe that is for capital gains, in wihich you show how much money you actually realized. Say you cash out $1,080,000, and you make $80,000. since you bought the stock for $1M.


That is different from holding onto $1,0800,000, when you made $80,000 but did not cash out. Even though you made $80,000, it's only on paper.

This is exactly the same thing as a house. Let's say one year, it went from being worth $1,000,000 to $1,100,000. You made $100,000, but since you did not realize the gains by selling it, you don't fill out the T form. Only when you sell the house do you show that you made $100,000 in capital gains.

In order to show $80,000 in capital gains, I would have to sell the whole $1M in stock.

But as bazookajoe pointed out, I think you would just show your bank statements to show the increase in value.
Capital Gains is not the same as investment income.

Think about it like this Stinkynuts - if you borrow to invest in a Non-Registered Account, CRA will allow you to deduct the interest on the loan....provided the stocks you buy either pay a dividend or are reasonably expected to at some point in the future. You can't deduct loan expenses if there is no income generated.

If you have a brokerage account, you can ask your broker for a Margin Loan (whereby you get a Line of Credit using the Stock Portfolio as Collateral).

If you have real-estate collateral, but little to no income, then you can't get a loan from a traditional Bank - you need to find a Home Equity Lender, like Capital Direct or Harold the Jewelry Buyer on Bathurst lol
 

farquhar

Well-known member
Jan 25, 2019
993
743
93
Then this is a problem. Limited access to credit is one of the unfortunate effects of income under-reporting and tax avoidance. I think, you have 2 choice: (i) realise your capital gains and pay taxes (it is only half of the regular rate) or (2) open a margin account with your stock brokerage and borrow from it (but the rate will a few % above prime)
It's his own damn fault for fudging his tax returns.....it's all good until you find out that the Banks uses the last 2 years tax returns to Underwrite loans...DOH! :doh:

Margin loan is what he should be doing....hopefully the market doesn't tank again and his broker gives him a Margin Call.
 

stinkynuts

Super
Jan 4, 2005
7,429
2,135
113
Capital Gains is not the same as investment income.

Think about it like this Stinkynuts - if you borrow to invest in a Non-Registered Account, CRA will allow you to deduct the interest on the loan....provided the stocks you buy either pay a dividend or are reasonably expected to at some point in the future. You can't deduct loan expenses if there is no income generated.

If you have a brokerage account, you can ask your broker for a Margin Loan (whereby you get a Line of Credit using the Stock Portfolio as Collateral).

If you have real-estate collateral, but little to no income, then you can't get a loan from a traditional Bank - you need to find a Home Equity Lender, like Capital Direct or Harold the Jewelry Buyer on Bathurst lol

Yes, this exactly. Now I see the problem. Capital gains is not investment income, as there is no steady stream of income coming in. Sure, I could be making 8% a year, but there's no guarantee it will continue. There is a difference between investment in stocks and a investment in business that pays a steady return.

Investment income would be like owing a property and collection a steady amount of rent each year, then declaring it on taxes.

However, I find it odd that having proof of a job or investment income over the last two years is all you need. You could be fired, or lose your business too. Maybe it's a bit more reliable than investments in stocks though.

Guess I'll have to find a real job to get a loan. sigh.
 

stinkynuts

Super
Jan 4, 2005
7,429
2,135
113
Even if you did sell and realize an $80k capital gain, so what?
That is not a steady repeatable income that the bank would be interested in.

Banks are seeing their own stocks drop a lot so I can`t see them considering any stocks as much of a collateral.
This exactly.
 

farquhar

Well-known member
Jan 25, 2019
993
743
93
However, I find it odd that having proof of a job or investment income over the last two years is all you need. You could be fired, or lose your business too. Maybe it's a bit more reliable than investments in stocks though.

Guess I'll have to find a real job to get a loan. sigh.
In the case of regular Employment Income from a steady job you've been at for 6 months or more, all you need is to show your last few paystubs and possibly a letter from your employer confirming you are Full-Time Permanent.

If you are obtaining the loan from the same Bank you have your Chequing account with, and you have your regular payroll deposited to the Chequing account, the Bank can verify the Employment Income that way and may not even need to see documents.

Provided it's Unsecured Lending, the process can be very fast - as long as you have your stuff in order, I know CIBC will Underwrite and Fund a Line of Credit same day.
 
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