TFSA "Lock In" Strategy?

[darrencope]

Hi guys,

Can someone please point out the flaw in my logic here (if there is one?).
Lets work with a hypothetical example:


On Jan 1, 2009, an investor puts $5000 into a TFSA
Through some good luck on the markets (I wish!) the account is worth $10,000 by Dec. 31, 2009
On Jan 1, 2010, the account is worth only $5000 again (again, hypothetical example, not likely to happen)
Now, the investor needs to withdraw the money, and takes out the $5000 in 2010
On Jan 1, 2011, the investor can only put $15,000 back into the account ($5000 for each of the three years, but no more since there was no gain)


Now, however; if, hypothetically the investor had withdrawn the $10,000 at the end of 2009, he would be able to contribute $20,000 in 2011. Even if he had re-invested the $10,000 on Jan 1,2010 and it immediately dropped in value to $5000, he would still be able to contribute $20,000 in 2011.

My question then, is as follows: Doesn't it make sense to always withdraw all contributions at year end (assuming they have increased in value at all) and re-invest it immediately in the new year? Let's disregard brokerage fees, even though they would have an impact.

Thoughts?

[Krox]

Hi guys,

Can someone please point out the flaw in my logic here (if there is one?).
Lets work with a hypothetical example:


On Jan 1, 2009, an investor puts $5000 into a TFSA
Through some good luck on the markets (I wish!) the account is worth $10,000 by Dec. 31, 2009
On Jan 1, 2010, the account is worth only $5000 again (again, hypothetical example, not likely to happen)
Now, the investor needs to withdraw the money, and takes out the $5000 in 2010
On Jan 1, 2011, the investor can only put $15,000 back into the account ($5000 for each of the three years, but no more since there was no gain)


Now, however; if, hypothetically the investor had withdrawn the $10,000 at the end of 2009, he would be able to contribute $20,000 in 2011. Even if he had re-invested the $10,000 on Jan 1,2010 and it immediately dropped in value to $5000, he would still be able to contribute $20,000 in 2011.

My question then, is as follows: Doesn't it make sense to always withdraw all contributions at year end (assuming they have increased in value at all) and re-invest it immediately in the new year? Let's disregard brokerage fees, even though they would have an impact.

Thoughts?

This only work if you know your investments are going to go down. What would happen if the $10,000 went up to $20,000 instead of going down to $5,000. Now you'd have to pay tax on that gain.

[darrencope]

This only work if you know your investments are going to go down. What would happen if the $10,000 went up to $20,000 instead of going down to $5,000. Now you'd have to pay tax on that gain.

I'm not sure I follow. If they go up, you're only out of the market for the time after you withdraw and before you reinvest (1 day in my hypothetical example, likely more in the real world) so it's unlikely to have much impact. And I'm referring specifically to a TFSA, so there should be no taxes on gains.

[manyoo99]

Hi guys,

Can someone please point out the flaw in my logic here (if there is one?).
Lets work with a hypothetical example:


On Jan 1, 2009, an investor puts $5000 into a TFSA
Through some good luck on the markets (I wish!) the account is worth $10,000 by Dec. 31, 2009
On Jan 1, 2010, the account is worth only $5000 again (again, hypothetical example, not likely to happen)
Now, the investor needs to withdraw the money, and takes out the $5000 in 2010
On Jan 1, 2011, the investor can only put $15,000 back into the account ($5000 for each of the three years, but no more since there was no gain)


Now, however; if, hypothetically the investor had withdrawn the $10,000 at the end of 2009, he would be able to contribute $20,000 in 2011. Even if he had re-invested the $10,000 on Jan 1,2010 and it immediately dropped in value to $5000, he would still be able to contribute $20,000 in 2011.

My question then, is as follows: Doesn't it make sense to always withdraw all contributions at year end (assuming they have increased in value at all) and re-invest it immediately in the new year? Let's disregard brokerage fees, even though they would have an impact.

Thoughts?

The max contribution per year is $5000. For 3 yrs, this becomes $15000. No matter how much your investment grows and how much you withdraw in any year, your contributions cannot exceed (technically) the $15000 for 3 yrs. For any amount "contributed" over and above the $15000, CRA will impose a 1% penalty.

CRA tracks the "contributed amount", by adding the total of deposits in a year. That total should be $5000, regardless of how your investment does (up or down).

Your TFSA contribution limit is available on the CRA website, under MyAccount.

[darrencope]

The max contribution per year is $5000. For 3 yrs, this becomes $15000. No matter how much your investment grows and how much you withdraw in any year, your contributions cannot exceed (technically) the $15000 for 3 yrs.

This is not my understanding. If you are correct, then my strategy doesn't work. However, according to http://www.tfsa.gc.ca/: "Full amount of withdrawals can be put back into the TFSA in future years. " (emphasis mine)

[canehdianman]

The max contribution per year is $5000. For 3 yrs, this becomes $15000. No matter how much your investment grows and how much you withdraw in any year, your contributions cannot exceed (technically) the $15000 for 3 yrs. For any amount "contributed" over and above the $15000, CRA will impose a 1% penalty.

CRA tracks the "contributed amount", by adding the total of deposits in a year. That total should be $5000, regardless of how your investment does (up or down).

Your TFSA contribution limit is available on the CRA website, under MyAccount.

This is incorrect. The OP's scenario is correct.

I have seen some people on here stating that the 'lock-in' isn't necessary, but I've seen no convincing arguments thus far (and I intend to lock-in my gains in December).

[Krox]

I'm not sure I follow. If they go up, you're only out of the market for the time after you withdraw and before you reinvest (1 day in my hypothetical example, likely more in the real world) so it's unlikely to have much impact. And I'm referring specifically to a TFSA, so there should be no taxes on gains.

I'm not following your logic then. If you remove $10,000 on Dec 31 2009, then on Jan 1 2010 put $10,000 back in the TFSA? Sure on Jan 1 2010 you would have $15,000 in contribution room , $5,000 for the new year and $10,000 for the amount you took out in 2009. But if you put the $10,000 back in you are only going to have $5,000. This is the same amount you'd have if you didn't do anything.

I'm not seeing the benefit....

[darrencope]

I have seen some people on here stating that the 'lock-in' isn't necessary, but I've seen no convincing arguments thus far (and I intend to lock-in my gains in December).

Thanks Canehdianman. Do you have reference to those other discussions here? My search didn't turn up anything on this specific topic, but I bet it's buried somewhere!

[ilusa]

I think this is a obvious question,, but just to confirm

If my 5k is now @ 5.500... That doesnt mean i can only put in only 4,500 Next year?????

Its 5k a year, no matter how well or bad your investments do??

Correct?

[yupislyr]

Yes, you get $5000 of contribution room each year, no matter what.

Your contribution room also increases by the full amount of whatever you withdrew from the account the previous year. If you withdrew $100,000, then your contribution room the next year would be $105,000.

[Jon Lai]

Guys, your contribution room expands and shrinks depending on how your investment grows or shrinks. Every year you get an additional $5000, but your existing contribution room depends on how much the account WORTH right at the moment in time.

[ponikarovsky]

probably a very stupid thing to ask, but i thought that all TFSA does is you deposit the 5k into it and it grows on its own with the 1.0125 % interest rate?

if so, how would the account go up in value to 5,500 let alone 10000 in a span of a year?

[Jon Lai]

probably a very stupid thing to ask, but i thought that all TFSA does is you deposit the 5k into it and it grows on its own with the 1.0125 % interest rate?

if so, how would the account go up in value to 5,500 let alone 10000 in a span of a year?

No, you can use TFSA for investments as well, not just a cash account.

[bcbgboy13]

probably a very stupid thing to ask, but i thought that all TFSA does is you deposit the 5k into it and it grows on its own with the 1.0125 % interest rate?

if so, how would the account go up in value to 5,500 let alone 10000 in a span of a year?

When you learn how to trade and open TFSA brokerage account - see for example this guy (http://www.redflagdeals.com/forums/should-i-pay-tax-us-stock-gain-809114/#post9692074)here whose account now is $25000.

[asdfvcx]

I'm not sure I follow. If they go up, you're only out of the market for the time after you withdraw and before you reinvest (1 day in my hypothetical example, likely more in the real world) so it's unlikely to have much impact. And I'm referring specifically to a TFSA, so there should be no taxes on gains.
You're looking at the unlikely situation where if you are out of the market 1 day, and you investment drops by 50% during that 1 day.

Krox is talking about the similarly unlikely scenario where the investment doubles during that 1 day out of the market. In this case you have a large capital gain that isn't tax except.


If you believe your scenario is something you should worry about, then you should also be worrying about Krox's scenario. In reality (as I expect Krox knows), neither scenario is something you should really be worrying about.

And if you are planning to immediately redeposit all of the money back into the TFSA, you are very unlikely to be gaining anything from this. And you'll be paying both with nuisance, and any of the brokerage fees.

[asdfvcx]

I have seen some people on here stating that the 'lock-in' isn't necessary, but I've seen no convincing arguments thus far (and I intend to lock-in my gains in December).
I see absolutely no gain from this, if you are planning to immediately redeposit all of the money.

So:

On Dec. 31/09, say your TFSA is worth $6000.
If you do nothing, then on Jan. 1/10, your TFSA will be worth $6000 and you will have $5000 in new contribution room.

or

On Dec. 31/09, say your TFSA is worth $6000.
You withdraw the $6000.
On Jan. 1/10, you now have $11,000 in TFSA contribution room.
You then redeposit $6000 in to the TFSA.
Your TFSA will be worth $6000 and you will have $5000 in contribution room.



The end results seem to be identical. What do you think gained from this so called, "locking in"?

[darrencope]

The end results seem to be identical. What do you think gained from this so called, "locking in"?


The difference is that if, in the next year (or any subsequent year) the value is less than (sum of $5000/year) and you withdraw the money, you will later only be able to re-invest (sum of $5000/year) wheareas if you had locked in, you could re-invest more.

[simms]

Now, however; if, hypothetically the investor had withdrawn the $10,000 at the end of 2009, he would be able to contribute $20,000 in 2011. Even if he had re-invested the $10,000 on Jan 1,2010 and it immediately dropped in value to $5000, he would still be able to contribute $20,000 in 2011.


Look, the bottom line is that contribution does not equal market value of your TFSA.

In both situations you lost $5k.
In the second situation, you gain $5k, and then you lose $5k, so it's a total wash. You don't grow your contribution room by "locking in" anything.

[asdfvcx]

The difference is that if, in the next year (or any subsequent year) the value is less than (sum of $5000/year) and you withdraw the money, you will later only be able to re-invest (sum of $5000/year) wheareas if you had locked in, you could re-invest more.
I don't totally understand what you are saying here, but I'm pretty sure it's wrong. :)


Going ahead another year, in 2011 your contribution limit for the TFSA will be:

$5000
Plus any unused contribution from 2010
Plus the total amount of any withdrawals made in 2010.


Any locks in made in 2009, if they are followed by immediately redepositing the money in 2010, will make absolutely no difference to your contribution limit in 2011.


In the two scenarios in my previous post, your contribution limit in 2011 is going to be identical. The lock in makes no difference.

[darrencope]

I don't totally understand what you are saying here, but I'm pretty sure it's wrong. :)


Going ahead another year, in 2011 your contribution limit for the TFSA will be:

$5000
Plus any unused contribution from 2010
Plus the total amount of any withdrawals made in 2010.


Any locks in made in 2009, if they are followed by immediately redepositing the money in 2010, will make absolutely no difference to your contribution limit in 2011.


In the two scenarios in my previous post, your contribution limit in 2011 is going to be identical. The lock in makes no difference.

Using your example above:

Lets now assume that the total value of your account fell to $1000 in 2010.

Under your scenario, in 2011, you would be able to recontribute: $5000 + unused room from 2010 (assume $0 if maxed out) + $0 (since you didn't withdraw anything in 2010) = $5000 that you would be able to contribute in 2011.

Under my scenario: $5000 + unused room from 2010 (assume $0 if maxed out) + $10,000 (amount withdrawn in 2010) = $15,000

[asdfvcx]

Using your example above:

Lets now assume that the total value of your account fell to $1000 in 2010.

Under your scenario, in 2011, you would be able to recontribute: $5000 + unused room from 2010 (assume $0 if maxed out) + $0 (since you didn't withdraw anything in 2010) = $5000 that you would be able to contribute in 2011.

Under my scenario: $5000 + unused room from 2010 (assume $0 if maxed out) + $10,000 (amount withdrawn in 2010) = $15,000
Where does this withdrawal come from?

You withdrew money in 2009, not 2010. The withdrawal in 2009 increased your limit in 2010. But you immediately erased this increased limit when you redeposited in 2010.

None of this is going to have an effect in 2011.

[Jon Lai]

Using your example above:

Lets now assume that the total value of your account fell to $1000 in 2010.

Under your scenario, in 2011, you would be able to recontribute: $5000 + unused room from 2010 (assume $0 if maxed out) + $0 (since you didn't withdraw anything in 2010) = $5000 that you would be able to contribute in 2011.

Under my scenario: $5000 + unused room from 2010 (assume $0 if maxed out) + $10,000 (amount withdrawn in 2010) = $15,000

If you withdrew $10K from your TFSA in 2010 and put them in exactly the same investment vehicle, and with your assumption that the $10K feel to $1K in 2010, then in the end you're still left with additional $10K contribution room for 2011. However, what if the $10K grows to $20K? Then you've effectively lost the addtiional $10K contribution room that you could've had if you left the money in your TFSA.

Either way, it's the same. You do not need to withdraw your money at the end of each year and take it out again unless you want to switch banks.

[Krox]

Using your example above:

Lets now assume that the total value of your account fell to $1000 in 2010.

Under your scenario, in 2011, you would be able to recontribute: $5000 + unused room from 2010 (assume $0 if maxed out) + $0 (since you didn't withdraw anything in 2010) = $5000 that you would be able to contribute in 2011.

Under my scenario: $5000 + unused room from 2010 (assume $0 if maxed out) + $10,000 (amount withdrawn in 2010) = $15,000

Where is this coming from? If you take out $10,000 in 2009 then re-contributed it in 2010 then you have used it already. You don't get to use it again in 2011.

edit: I see asdfvcx beat me to it.

[globalc]

if i opened an account on march 1 of last year...can i contribute the following years 5000 on jan 1 or do i have to wait till mar 1 again?

and is there any other options regarding distribution; im getting virtually no interest on this!..maybe 50 dollars a year!

[asdfvcx]

if i opened an account on march 1 of last year...can i contribute the following years 5000 on jan 1 or do i have to wait till mar 1 again?
You'll get a new $5000 on Jan. 1, 2010. It doesn't matter when you opened your account, or even if you opened an account.

and is there any other options regarding distribution; im getting virtually no interest on this!..maybe 50 dollars a year!
You can open a mutual fund account and hold mutual funds. You can open a brokerage account and hold stocks, bonds, mutual funds, whatever. Anything you can hold in a RRSP, you can hold in a TFSA.

[dark169]

Guys, your contribution room expands and shrinks depending on how your investment grows or shrinks. Every year you get an additional $5000, but your existing contribution room depends on how much the account WORTH right at the moment in time.

this is 100% WRONG

If I have 5k in my tfsa jan 1 2009 and it doubles, my contribution room jan 1 2010 is still an addiiotanl $5000.

I think the OP is afraid of loosing TFSA extra room that can be created when you have gains and withdraw.

Withdrawing at a loss position means you have lost forever some TFSA room, but its lost already as you can't top it up becuase of a loss. Withdrawing at a gain creates tfsa contribution room. IF you struck it big on a penny stock and turned 5k into 50k, sell keep the funds in the TFSA.
IF you wanted to continue holding the risky stock, you could move it out and gain the TFSA room for say cash and hold the stock outside.

Examples:

5k on 1/1/09,
10% loss -> $4500.
12/31/09 -need to withdraw all funds for some unforseen reason.
1/1/10 new total TFSA contribution room is 9500 (5000 for new year + last years withdraws). The room of that lost $500 is lost and needs to be made up by future gains. But it was lost before you withdrew.

5k on 1/1/09,
10% gain -> $5500.
12/31/09 -need to withdraw all funds for some unforseen reason.
1/1/10 new total TFSA contribution room is 10500 (5000 for new year + last years withdraws).

[Jon Lai]

this is 100% WRONG

If I have 5k in my tfsa jan 1 2009 and it doubles, my contribution room jan 1 2010 is still an addiiotanl $5000.

I think the OP is afraid of loosing TFSA extra room that can be created when you have gains and withdraw.

Withdrawing at a loss position means you have lost forever some TFSA room, but its lost already as you can't top it up becuase of a loss. Withdrawing at a gain creates tfsa contribution room. IF you struck it big on a penny stock and turned 5k into 50k, sell keep the funds in the TFSA.
IF you wanted to continue holding the risky stock, you could move it out and gain the TFSA room for say cash and hold the stock outside.

Examples:

5k on 1/1/09,
10% loss -> $4500.
12/31/09 -need to withdraw all funds for some unforseen reason.
1/1/10 new total TFSA contribution room is 9500 (5000 for new year + last years withdraws). The room of that lost $500 is lost and needs to be made up by future gains. But it was lost before you withdrew.

5k on 1/1/09,
10% gain -> $5500.
12/31/09 -need to withdraw all funds for some unforseen reason.
1/1/10 new total TFSA contribution room is 10500 (5000 for new year + last years withdraws).

You might have misunderstood. By contribution room, I mean your entire contribution room, not next year's additional $5K, which of course stays the same each year. But the actual room you have for contributions under the entire TFSA umbrella grows or shrinks depending on your investments.

[asdfvcx]

You might have misunderstood. By contribution room, I mean your entire contribution room, not next year's additional $5K, which of course stays the same each year. But the actual room you have for contributions under the entire TFSA umbrella grows or shrinks depending on your investments.
If I understand what you are saying, then this is very wrong.


If I deposit $4000 in a TFSA, I have $1000 left in contribution room.
If my $4000 investment grows to $4500, I still have $1000 left in contribution room.

[Jon Lai]

If I understand what you are saying, then this is very wrong.


If I deposit $4000 in a TFSA, I have $1000 left in contribution room.
If my $4000 investment grows to $4500, I still have $1000 left in contribution room.

But your total contribution room is now $5500, ie., your total contribution room has grew.

[Krox]

But your total contribution room is now $5500, ie., your total contribution room has grew.

Only IF you withdraw that 4500 and it is applied only to subsequent years. If you leave that 4500 in your TFSA, your contribution room will still be 1,000.

[asdfvcx]

But your total contribution room is now $5500, ie., your total contribution room has grew.
I don't think you understand what contribution room means.

It means the amount remaining that you can add to your TFSA. If someone says you remaining contribution room is $1000, that means you can only deposit a maximum of $1000 to your TFSA for the remainder of this year, without having penalties.


If doesn't mean: the total amount in your TFSA + the maximum you can still contribute this year.

[simms]

If I deposit $4000 in a TFSA, I have $1000 left in contribution room.
If my $4000 investment grows to $4500, I still have $1000 left in contribution room.

But your total contribution room is now $5500, ie., your total contribution room has grew.
Jon, you're getting contribution room confused with value of your TFSA.

The gain that you get inside the TFSA has nothing to do with the contribution room you have left.

4000+500 (gain from TFSA) + 1000 (deposit after) = $5500. You only contributed $5000.
5000+500 (gain from TFSA) = $5500. Again, you only contributed $5000. You don't "make extra space".

[Jon Lai]

Only IF you withdraw that 4500 and it is applied only to subsequent years. If you leave that 4500 in your TFSA, your contribution room will still be 1,000.

But this is precisely what this thread is about - increasing contribution room by withdrawing, isn't it? Sorry if I was confused.

[Sanchez]

Just chipping in to say that asdfvcx and Krox are correct, and there is no point in TFSA "lock in". In particular, any scenario showing how to "lock in" an increase or decrease in TFSA room using withdrawals is generally equivalent to simply selling the investment in the TFSA and holding cash there - even the unlikely examples of 100% gains or 100% losses.

For example, in the OP's example, you could sell and go to cash on Dec 31st, make no withdrawal from the TFSA and be in the same shape as the withdrawal case.

[Sanchez]

But this is precisely what this thread is about - increasing contribution room by withdrawing, isn't it? Sorry if I was confused.

You are confusing "contribution room" with "total TFSA room". You are talking about the latter, and you make the good point that it remains the same, regardless of withdrawal pattern. Total TFSA room = current TFSA value + remaining contribution room. When you withdraw, you reduce the value, but the contribution room increases by a corresponding amount.

Since the "total room" is what we care about (what is valuable), you can look at the ways to increase it (given that it is TFSA value + contrib room):

1) If the TFSA value goes up (market gains) you get more total room
2) If the remaining contribution room goes up, without an offset in the value (because it is a new year, for example) you get more room

That is all. Withdrawal doesn't increase room because the effects on the terms are offsetting.

[darrencope]

Thanks for the clarification guys. I thought there was a flaw in my logic!

[cloudycanada]

Locking makes sense totally .... but not in this scenario (once a year).

Remember the news that Ministry of Finance blocked swapping for TFSA? (also imposing 100% tax on intentional contribution).

This locking-in mechanism is exactly what MOF is disallowing in TFSA now. It was to block people from locking in accrued gains through swapping shares and cash. Your OP is similar to the "swapping", where you essentially turn shares into cash, and put the cash back in to buy shares (at a lower price) .... wait for shares to gain a little bit, and then do the swap again. If you do it frequent enough, you can lock-in/bump-up your contribution room.

As you can see, to really benefit from locking in accrued gains, it needs to be done on a more frequent basis to convert that small difference in share prices.

However, MOF has banned swapping for TFSA.

If you only do it once a year, it's probably not worth it (not to mention the uncertainly of share price movement). But in theory, locking in works (if it doesn't, MOF wouldn't put in the law to disallow it) :D

[Sanchez]

I don't think you know what you are talking about. Even with the new law, you can "exploit" the system in an identical way by selling to cash and withdrawing, or simply selling to cash and leaving the proceeds in the TFSA. How is that gaming the system? If you could reliably predict these small movement and lock in gains after a rise, you're printing money and whi cares about a $5,000 TFSA.

[Krox]

I don't think you know what you are talking about. Even with the new law, you can "exploit" the system in an identical way by selling to cash and withdrawing, or simply selling to cash and leaving the proceeds in the TFSA. How is that gaming the system? If you could reliably predict these small movement and lock in gains after a rise, you're printing money and whi cares about a $5,000 TFSA.

From my understanding, the swapping is from a TFSA and RRSP which would essentially allow you to move your money from the RRSP to the TFSA.

here's a link where someone describes this abuse;
http://michaeljamesmoney.blogspot.com/2009/10/tfsa-abuse.html

[simms]

From my understanding, the swapping is from a TFSA and RRSP which would essentially allow you to move your money from the RRSP to the TFSA.

here's a link where someone describes this abuse;
http://michaeljamesmoney.blogspot.com/2009/10/tfsa-abuse.html

I don't know about how you can "swap" between RRSP/TFSA. If something is removed from the RRSP, you pay taxes on the time of removal...

Interesting through on the puts/calls though. If you were to buy puts in the TFSA and calls on the RRSP, wouldn't that kind of be a wash/swap?

[cloudycanada]

This an example of the swap calculation, and how it affects your contribution room and how you shift assets RRSP and TFSA. The real point of the swap is make RRSP assets tax-free eventually, but the by-product is a increased contribution room (which I mentioned in the above post), which is what the OP was questioning.

http://blog.taxresource.ca/what-the-new-tfsa-rules-prevent/

To Sanchez:
selling for cash and withdrawing does not work because you cannot put the money back until next year. If you can only do it once a year, I wouldn't call that exploit the system (benefit is very uncertain)

selling for cash and leave the proceeds - this doesn't affect your contribution room at all - which was what OP was asking about. (this is pure investment issue, nothing to do with TFSA)

That's why i said locking in doesn't work if you can only do it once a year ... it's not worth it. I know the rules on TFSA, and I was answering to OP's question re: contribution room implications.

To Krox
You are correct, I should have put down it was for registered accounts, I simply stated cash coz I thought it might be easier to see and didn't want to get into the shifting assets from RRSP to TFSA part of the swap mechanism.

[halflife150]

I don't think you know what you are talking about. Even with the new law, you can "exploit" the system in an identical way by selling to cash and withdrawing, or simply selling to cash and leaving the proceeds in the TFSA. How is that gaming the system? If you could reliably predict these small movement and lock in gains after a rise, you're printing money and whi cares about a $5,000 TFSA.

From what I've read, I don't think most people understand the abuse either. This abuse only works for people who own illiquid shares in a company, generally a private corp., that they have access to privileged information.

If the shares were liquid then they could just sell the shares in their RRSP and buy them in their TFSA, which would be much cheaper then doing a swap which costs more then the trading commissions yet puts them in the exact same situation. Illiquid shares they can't sell, so they swap them in and out depending whether its a gain or loss.

Being able to predict gains and loses can only happen if you have privileged information, which is what happens for people who own shares in private corps., especially if they are involved in day to day operations.

So if you don't have both illiquid shares and access to privileged information then an RRSP/TFSA swap makes no sense whatsoever.