Questions about tfsa rules implemented on OCT 16 2009

[J_u_n_i_o_r_3]

http://www.fin.gc.ca/n08/09-099-eng.asp

can some one explain what Asset Transfer Transactions means?

[J_u_n_i_o_r_3]

Found the answer http://michaeljamesmoney.blogspot.com/2009/10/tfsa-abuse.html

I thought in TFSA if you pull money out you cant put it back in till the next year

[Sanchez]

What has been banned is in-kind swaps, where you swap an asset into the TFSA, and swap another asset out, where the assets have the same market value.

Contributing and withdrawing is not affected.

[J_u_n_i_o_r_3]

are swap different then transferring stocks from non registered account to a TFSA

[ACC-Major]

Is it acceptable under the new regulation for transferring positions (stocks) from my TFSA to RRSP?

[ghostryder]

Is it acceptable under the new regulation for transferring positions (stocks) from my TFSA to RRSP?

Why would you want to move assets from a TFSA to a RRSP?

Any gains on the investment is tax free in the TFSA, in the RRSP you will pay full income tax on those gains when you withdraw.

[Sanchez]

Why would you want to move assets from a TFSA to a RRSP?

Any gains on the investment is tax free in the TFSA, in the RRSP you will pay full income tax on those gains when you withdraw.

Because you get a big up-front tax break which typically outweighs the need to pay tax on withdrawal.

[ACC-Major]

Because you get a big up-front tax break which typically outweighs the need to pay tax on withdrawal.

That, my friends, is the proper way of using the TFSA.
For people who don't have enough money to max out RRSP and TFSA. This method will maximize the RRSP contribution and tax deduction.


So, the answer is yes?

[ghostryder]

Because you get a big up-front tax break which typically outweighs the need to pay tax on withdrawal.

Maybe I am just tired, but I still don't get the point. I put $5k in my TFSA, purchase equities (commission) then transfer them (if possible) from my TFSA to RRSP. Then I have a $5k contribution to my RRSP. What is the point? I could have just made the contribution to my RRSP in the first place.

And by moving equities to my RRSP I have now volunteered to pay full income tax on my capital gains/dividends when I withdraw at retirement. Had I left them in the TFSA there would be no tax, and the tax would be lower if non-registered. Plus these withdrawals are income, so they reduce any income tested benefits like OAS, GSTC, Prov prescription drug assistance etc.

Sure, maybe if my $5K TFSA has gone up substantially I could withdraw some (or transfer) to make a RRSP contribution, but again, I would be moving assets to a RRSP where any gains I have will be taxed as full income on withdrawal, plus the effect on income tested benefits.

Personally most of my RRSP is fixed income and US equities, since the fixed income will be taxed as income regardless I might as well defer as long as possible. The US equities pay dividends which are taxed as income and I avoid the 15% US withholding by having them in my RRSP.

Up until recently my tax bracket was low enough that I paid zero tax (actually negative = refund) on CDN dividends so there was no point in having them anywhere but a non-registered account.

[ACC-Major]

Maybe I am just tired, but I still don't get the point. I put $5k in my TFSA, purchase equities (commission) then transfer them (if possible) from my TFSA to RRSP. Then I have a $5k contribution to my RRSP. What is the point? I could have just made the contribution to my RRSP in the first place.

And by moving equities to my RRSP I have now volunteered to pay full income tax on my capital gains/dividends when I withdraw at retirement. Had I left them in the TFSA there would be no tax, and the tax would be lower if non-registered. Plus these withdrawals are income, so they reduce any income tested benefits like OAS, GSTC, Prov prescription drug assistance etc.

Sure, maybe if my $5K TFSA has gone up substantially I could withdraw some (or transfer) to make a RRSP contribution, but again, I would be moving assets to a RRSP where any gains I have will be taxed as full income on withdrawal, plus the effect on income tested benefits.

Personally most of my RRSP is fixed income and US equities, since the fixed income will be taxed as income regardless I might as well defer as long as possible. The US equities pay dividends which are taxed as income and I avoid the 15% US withholding by having them in my RRSP.

Up until recently my tax bracket was low enough that I paid zero tax (actually negative = refund) on CDN dividends so there was no point in having them anywhere but a non-registered account.

lol you are thinking the wrong way.
The whole purpose of investing is making your investment grow not shrink. You have to agree on that before you read on.

Now then, suppose you have $5,000 to put into your RRSP and your RRSP contribution room is more than $,5000 (for say, $10,000).

Beginning of the year, you contribute that $5,000 you have to your TFSA, and purchased stocks.
Then over the course of the year, your investment of $5,000 grew to $6,000.
You transfer the position to your RRSP; as a result, you contributed $6,000 to your RRSP instead of the initial $5,000. Which increases your deduction for the current year. take that extra tax refund of $210.50 and run lol ($1,000 x 15% Fed + 6.5% Ontario, lowest tax bracket), worry about paying taxes 40 years later.

The reason i suggested transferring the positions is because that way you can reduce your commission and reduce the risks of selling your growing security.