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noneed2live

using LOC for investment purposes

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I've given this lots of thought. I didn't do it during med school because having investments = assets that, if you're honest about reporting them when you apply for student loans, will decrease your eligibility for loans and lucrative grants. They don't care that the assets are debt-financed. You could also potentially choose not to report them, and they may never find out, as long as you're not booking large capital gains or dividends on your income tax return.

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Investing in a non-registered account at the med school stage is nonsensical when it is very likely that you have unused room in TFSA. But, it's circular.. once you invest in TFSA, your financial institutions must report your registered assets to CRA for the purpose of calculating your max contribution limit etc. and OSAP pulls info from CRA.. so I would advise not. Plus, debt-financing investments at this point is ill-advised given that the stock market is unpredictable in the short-term (4-6 years horizon). 

I had given this a thought to - heck I even wanted to buy a house! But, I would really exceed my personal risk tolerance to do so.. so I opted not to.

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Any kind of investment is going to be unpredictable by nature... but come to think about it, as long as you're prepared to carry the interest payments (potentially with interest rates going up over the next few years), $300,000 is manageable debt for a future physician. One thing that the CRA would have a hard time finding out is physical real estate...

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6 minutes ago, shematoma said:

Any kind of investment is going to be unpredictable by nature... but come to think about it, as long as you're prepared to carry the interest payments (potentially with interest rates going up over the next few years), $300,000 is manageable debt for a future physician. One thing that the CRA would have a hard time finding out is physical real estate...

I am talking about time horizon - equity-based instruments appreciate over the long-term horizon. The short-term shocks are what spook a lot of people.. esp unsophisticated investors who are using LOC-money to invest.. 

EDIT: Technically, OSAP allows for a principal residence once you're out of high school for 4 years without impacting grants/loans eligibility, so you can invest in real estate as long as you also happen to use it to meet the def of principal residence.. 

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1 minute ago, la marzocco said:

I am talking about time horizon - equity-based instruments appreciate over the long-term horizon. The short-term shocks are what spook a lot of people.. esp unsophisticated investors who are using LOC-money to invest.. 

Fair enough, but if someone is going into this knowing what they're getting into, they could have to stomach shocks and swings of ~30% or more potentially, the expected return from equities still exceeds the LOC interest in the long term.

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Just now, shematoma said:

Fair enough, but if someone is going into this knowing what they're getting into, they could have to stomach shocks and swings of ~30% or more potentially, the expected return from equities still exceeds the LOC interest in the long term.

100% agree. I am not going to lie that I had the temptation to the same :) but I am relatively risk-averse.

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1 minute ago, Coronaxtra said:

What about taking your LOC and investing in the states? Does that get reported to OSAP? I’ve been giving it some thought recently and I’m  assuming there is no cross border reporting?

If you can open a US-based investment account and you report US taxes as a US resident, you may be fine but if you're a non-resident then you may have reporting obligations to the CRA. If you're going to school in Canada and filing taxes here as a resident then it's complicated and you might need some professional accounting advice.

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6 minutes ago, shematoma said:

If you can open a US-based investment account and you report US taxes as a US resident, you may be fine but if you're a non-resident then you may have reporting obligations to the CRA. If you're going to school in Canada and filing taxes here as a resident then it's complicated and you might need some professional accounting advice.

100% you would be a Canadian resident if you're studying at a Canadian medical school.. reporting taxes as US resident wont even be an option.. plus do you want to get off on the wrong foot with the CRA this early in your career lol.. reminder to everyone that as a Canadian resident, you are required by law to report worldwide income - there are foreign tax credits to offset some foreign taxes paid, but these worldwide income sources must be reported. 

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6 minutes ago, la marzocco said:

100% you would be a Canadian resident if you're studying at a Canadian medical school.. reporting taxes as US resident wont even be an option.. plus do you want to get off on the wrong foot with the CRA this early in your career lol.. reminder to everyone that as a Canadian resident, you are required by law to report worldwide income - there are foreign tax credits to offset some foreign taxes paid, but these worldwide income sources must be reported. 

I think you could technically be a "deemed" non-resident if you were, say a dual citizen of a foreign country with which Canada has a tax treaty (which the US is) intending to go back after you study, especially if you have residential or family ties abroad.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/international-students-studying-canada.html

 

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3 minutes ago, shematoma said:

I think you could technically be a "deemed" non-resident if you were, say a dual citizen of a foreign country with which Canada has a tax treaty (which the US is) intending to go back after you study, especially if you have residential or family ties abroad.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/international-students-studying-canada.html

 

That's fine. But, then it is unlikely that person would qualify for OSAP... bc to qualify for OSAP one needs to not only be a Canadian citizen, but also have Ontario residency, that is, have lived in Ontario for at least 12 consecutive months without attending full-time post-secondary school. If this dual citizen is transient and only coming to Canada to study and plan to go back the US, then they won't qualify for OSAP.

Even if they decide to come here for a year and work in Ontario to qualify for OSAP before going to university, they would be deemed a Canadian resident for tax purposes that year due to sojourning rules for having stayed in Canada > 183 days.

 

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3 minutes ago, la marzocco said:

That's fine. But, then it is unlikely that person would qualify for OSAP... bc to qualify for OSAP one needs to not only be a Canadian citizen, but also have Ontario residency, that is, have lived in Ontario for at least 12 consecutive months without attending full-time post-secondary school. If this dual citizen is transient and only coming to Canada to study and plan to go back the US, then they won't qualify for OSAP.

Even if they decide to come here for a year and work in Ontario to qualify for OSAP before going to university, they would be deemed a Canadian resident for tax purposes that year due to sojourning rules for having stayed in Canada > 183 days.

 

This is getting into very complicated territory. Much safer to try this in residency when you still have access to the LOC and don't have loans to worry about. Or forego getting student loans if one thinks the investment returns are high enough. But the grants and scholarships...

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1 minute ago, shematoma said:

This is getting into very complicated territory. Much safer to try this in residency when you still have access to the LOC and don't have loans to worry about. Or forego getting student loans if one thinks the investment returns are high enough. But the grants and scholarships...

Agreed. I am quite impressed with the new OSAP actually. The grants:loans ratio have improved and they are giving more money in absolute terms. OSAP loans are good too in that they are interest-free during school.. though prob need to refinance when you graduate since the interest rates are astronomical on these student loans lol

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1 hour ago, la marzocco said:

Investing in a non-registered account at the med school stage is nonsensical when it is very likely that you have unused room in TFSA. But, it's circular.. once you invest in TFSA, your financial institutions must report your registered assets to CRA for the purpose of calculating your max contribution limit etc. and OSAP pulls info from CRA.. so I would advise not. Plus, debt-financing investments at this point is ill-advised given that the stock market is unpredictable in the short-term (4-6 years horizon). 

I had given this a thought to - heck I even wanted to buy a house! But, I would really exceed my personal risk tolerance to do so.. so I opted not to.

Well, the Non-Registered / TFSA issue is actually much less relevant in med school since your returns won't be taxed anyway... I still think a TFSA in a better option since, in the event that you have to withdraw from it, you will have essentially raised your contribution limit for when you earn money for real.

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Does having contributions in a TFSA with an investment firm like wealthsimple reduce OSAP qualifications? I have some personal savings and would like to max out my yearly TFSA contributions ($5000), which I feel is not a huge risk over the course of med school ($20000/4 years). Anyone with experience in this regard?

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1 hour ago, iFlayx said:

Does having contributions in a TFSA with an investment firm like wealthsimple reduce OSAP qualifications? I have some personal savings and would like to max out my yearly TFSA contributions ($5000), which I feel is not a huge risk over the course of med school ($20000/4 years). Anyone with experience in this regard?

This person was allegedly 'denied' OSAP for this reason:

https://www.reddit.com/r/PersonalFinanceCanada/comments/53cj89/denied_osap_through_tfsa_investment_with_3_more/

If you had an RRSP, I believe they allow you to keep $2K for each year since you've turned 18 years old. But a TFSA can be easily liquidated without tax penalties, so that's maybe why they're less forgiving. Since you're required to contribute $3K per year yourself to your education, you could in theory keep $3K in the TFSA without OSAP caring about it.

Any firm that allows you to open a TFSA will report it to the government, so if you have a TFSA, OSAP can find out about it if they pull your info from the CRA. I don't know if it's worth the risk of getting denied OSAP, especially the grants.

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