# Transferring TFSA from TD e-series to Questrade, capital gains?



## numonee (Apr 21, 2010)

Hello:

I am looking to transfer my current TD Direct Investing TFSA account to a TFSA Questrade account.
My TFSA is currently around $40000, holding TD CD BD IDX-E SE TDB909. 
I have decided to transfer these monies to a TFSA account with Questrade and invest all of the transferred funds in VXC (Vanguard FTSE All-World ex Canada Index ETF). I am in the process of rebalancing my couch potato portfolio and want to start getting into ETFs. Because it is a registered account, I will have Questrade complete the transfer to avoid any complications with the CRA. My bond allocation will be adjusted accordingly with new money invested.

Just wondering if there are any concerns (tax-wise) if the TDB909 funds are sold and the VXC purchased. I don't know much about capital gains/losses but they seem to be mentioned frequently when others discuss selling and buying. So, I just want to know if there are potential issues that may result from my planned changes.

Please note that I am still learning a lot about the world of investing and I appreciate all the assistance I've received on forums but please provide answers with complete explanations. 

Thanks.


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## mordko (Jan 23, 2016)

Nope, nothing to worry about. Within registered accounts you can sell holdings without incurring capital gains taxes. This would only be a concern when selling assets in a non registered account.


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## Eclectic12 (Oct 20, 2010)

numonee said:


> ... I am looking to transfer my current TD Direct Investing TFSA account to a TFSA Questrade account ...
> I have decided to transfer these monies to a TFSA account with Questrade ... Because it is a registered account, I will have Questrade complete the transfer to avoid any complications with the CRA.


Having the paperwork filled out will keep the transfer tax free, without using TFSA contribution room. It may also trigger a transfer fee so you'll need to check with the TD fee schedule.

Some choose to avoid the transfer fee by withdrawing the $$$ in late Dec, waiting for Jan of the following year for the previous year's withdrawal to be come TFSA contribution room and then contribute the same $$$ to the other TFSA in Jan. For example, withdrawing $15K on Dec 28th means on Jan 1st, in addition to the new year's $5.5K or so of fresh TFSA contribution room, one has an additional $15K of TFSA contribution room from the withdrawal.

Choosing to wait would require one to be okay with a small period from the late Dec withdrawal to the Jan contribution of the $$$ being taxable and possibly out of the market. For example, to keep the tax dollars low, one could sell the TD fund in Dec then withdraw cash. At between 0.75% to 2+% for a week or two, there won't be much tax to pay. After contributing the $$$, one would buy the VXC.


Based on the size of the $$, it may be better to pay the transfer fee to keep things simple.




numonee said:


> ... Just wondering if there are any concerns (tax-wise) if the TDB909 funds are sold and the VXC purchased. I don't know much about capital gains/losses but they seem to be mentioned frequently when others discuss selling and buying.


Capital gains/losses only matter in a taxable account ... so as long as the selling/buying is happening in a registered account, there are no capital gains implications. I say "capital gains/losses" as buying US investments that pay dividends means the US will take their 15% withholding tax on the dividend money paid (which is different than capital gains).


Since you are learning, I would suggest taking your time to learn how to calculate and report capital gains (or losses) on your tax return. While you can avoid this by using only registered accounts (TFSA and/or RRSP), the RRSP has to be collapsed, I believe starting after age 71. Unless the TFSA can hold everything - someday, you likely will need to report capital gains as well as possibly dividend income.

Taking your time to learn it before you need it saves a lot of mistakes and headache later.


You don't mention if you are using an RRSP but as you are learning, I thought I should point out that while buying/selling investments in the RRSP has no tax implications, withdrawing say $5K from an RRSP means reporting $5K of income on that year's tax return. Some forget that an RRSP defers income tax.


I hope this helps clear up a few things as well as starts you on the way to learning what you need to know.

Cheers


*PS*

I missed saying that you can talk to Questrade to see if in exchange for transferring the $40K into their account, they are willing to refund the transfer fee, if there is one.

The only wrinkle that I have read in posts is that if the transfer fee is taken from the TFSA $$$, you will need TFSA contribution room to put the refunded back.


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## My Own Advisor (Sep 24, 2012)

Good point about avoiding any fees, including any fees taken out of TFSA and/or RRSP. Messy for the investor.


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## numonee (Apr 21, 2010)

Thank you for the very detailed response, Eclectic12. 
The information that you have provided was very helpful. So helpful, it triggered another question :confusion:

You mentioned 
"Since you are learning, I would suggest taking your time to learn how to calculate and report capital gains (or losses) on your tax return..."
I do have a few non-registered accounts and I may be making some moves which could potentially trigger capital gains (or losses). 
I will search around on the forums for a simplified explanation of how to do this. However, I have a feeling that the calculations are not simple and may be best done by my tax preparer? 
Could you possibly provide a good link to start reading about how to calculate and report capital gains? 


I spoke with Questrade and they advised that once the amount of the account being transferred is $25K or greater, they are willing to refund the transfer fee.

I do use an RRSP but I have never withdrawn from it. Hopefully, I won't have to until retirement.


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## numonee (Apr 21, 2010)

Eclectic12 said:


> Having the paperwork filled out will keep the transfer tax free, without using TFSA contribution room. It may also trigger a transfer fee so you'll need to check with the TD fee schedule.
> 
> Some choose to avoid the transfer fee by withdrawing the $$$ in late Dec, waiting for Jan of the following year for the previous year's withdrawal to be come TFSA contribution room and then contribute the same $$$ to the other TFSA in Jan. For example, withdrawing $15K on Dec 28th means on Jan 1st, in addition to the new year's $5.5K or so of fresh TFSA contribution room, one has an additional $15K of TFSA contribution room from the withdrawal.
> 
> ...




Thank you for the very detailed response, Eclectic12. 
The information that you have provided was very helpful. So helpful, it triggered another question 

You mentioned 
"Since you are learning, I would suggest taking your time to learn how to calculate and report capital gains (or losses) on your tax return..."
I do have a few non-registered accounts and I may be making some moves which could potentially trigger capital gains (or losses). 
I will search around on the forums for a simplified explanation of how to do this. However, I have a feeling that the calculations are not simple and may be best done by my tax preparer? 
Could you possibly provide a good link to start reading about how to calculate and report capital gains? 


I spoke with Questrade and they advised that once the amount of the account being transferred is $25K or greater, they are willing to refund the transfer fee.

I do use an RRSP but I have never withdrawn from it. Hopefully, I won't have to until retirement.


numonee 
"Read. Ask Questions. Read. Ask Questions. Read. Understand. Learn."


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## Eclectic12 (Oct 20, 2010)

numonee said:


> Thank you for the very detailed response, Eclectic12.
> The information that you have provided was very helpful. So helpful, it triggered another question ...




No problem ... I thought it might.




numonee said:


> ... I will search around on the forums for a simplified explanation of how to do this. However, I have a feeling that the calculations are not simple and may be best done by my tax preparer?


There's too many variables to be sure ... while the range is wide with some complicating factors, one may own the types that are simple for a long time before buying the more complicated ones. 

As well, the math is relatively simple where being able to use a spreadsheet takes away a lot of the work.

Some questions for you are:
a) what do you own?
b) are you comfortable with spreadsheets/math?

The way that worked for me was to look for a beginner's book on investing in the library. I looked for one that had a chapter on taxes plus provided a series of examples, starting with the easiest.

At a high level, you are tracking your expenses to buy so that the proceeds from selling all/part of the shares owned plus an selling expenses correctly to CRA on one's tax return (schedule 3, Part 3 "Publicly Owner Shares, Mutual Fund Units ... Other Shares") the net result.
http://www.cra-arc.gc.ca/E/pbg/tf/5000-s3/README.html

The key is to track your costs, as each transaction that affect the cost is made. I find recording it just after it happens makes life a lot easier when I go to sell (plus helps me know in advance whether the sell price is for a gain or not).

The cost is called "adjusted cost base" (or ACB), which has to take into account all taxable shares owned, whether they are spread across two taxable accounts or everything is in one taxable account. 

Here is an article about tracking ACB that also does the capital gains calculation. If you compare the columns on Schedule 3, Part 3 from the CRA link with the capital gain calculation in paragraph five, you should see how the columns line up on the tax form.
http://www.theglobeandmail.com/glob...he-abcs-of-tracking-your-acb/article17838427/

Note that paragraph five is the simple version where one buy of the stock was made to get an ACB then everything was sold to make for one capital gain calculation. Focus on that one to start then ask questions.

Other factors such as multiple buys or partial sells or mixed income like return of capital (RoC) affect the ACB as well as the Capital Gain (or Loss) calculation but understanding the easiest case to start is important. After all, everything else includes the basic case ... there's just a few more factors to take care of.


Here's another link that gives a good overview of what and why .... as I say, once the simple case is understood - there's only a few other things to look for that would change what is needed.
http://boomerandecho.com/how-to-calculate-capital-gains-and-adjusted-cost-base-acb/#


It is like any other skill or hobby ... master the basics, keep expanding what you know and before you know it - what used to look like a mountain of the size of Mount Everest is a variation of the ant hill you walked by.




numonee said:


> I spoke with Questrade and they advised that once the amount of the account being transferred is $25K or greater, they are willing to refund the transfer fee.


Likely it makes more sense to use the refund and do the transfer ... rather than waiting for year end. Knowing about the year end withdraw, re-contribute the next year strategy gives you another tool, in case in the future - it is of use.


Cheers


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## yupislyr (Nov 16, 2009)

Eclectic12 said:


> The only wrinkle that I have read in posts is that if the transfer fee is taken from the TFSA $$$, you will need TFSA contribution room to put the refunded back.


I guess it's an instance of YMMV. 

I went through this scenario a number of years ago. TD took the transfer fee out and transferred the TFSA to Questrade very late in the year. I elected to do it this way since Questrade said they'd cover the fee. In the meantime, I maxed out my new TFSA at Questrade as it was now January of the new year. It was only after I had maxed out my TFSA did I receive the fee rebate by Questrade.

I've had no issues from Questrade or CRA about the fee reimbursement to an already full TFSA. I suppose it's probably because it was a fee rebate, not an actual contribution by anyone.

In the end, the OP may actually come out a little ahead as Questrade rebated me $150 but the fee TD charged was only $135.


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## numonee (Apr 21, 2010)

Eclectic12 said:


> No problem ... I thought it might.
> 
> 
> 
> ...




Thanks for all of your responses and links to the useful sites, Eclectic12. Much appreciated.
You asked me a few questions, so here are my responses below. 
Also, I asked a few questions too. I hope you will be able to answer them.

You mentioned simple and complicated [funds]. I prefer to keep it simple. Based on what I own, I think I’m a pretty simple investor, investing in a couch potato portfolio via TD e-series (TDB900, TDB902, TDB909, TDB911). I currently do not own any ETFs. This transfer would be my first and I plan on buying VXC.
*Can you please provide examples of each, simple and complicated?*

Thank you very much for providing an explanation and links to familiarize myself with calculating ACB. 
Yes, I am comfortable with spreadsheets/math. However, I am a bit nervous about math when it comes to calculating and reporting any numbers (not included in a formal tax document) to the CRA. 
After a quick skim and searching the forums for questions about calculating ACB, I'll admit it is a bit daunting. As per your advice, and others, I will start learning how to do these calculations now so that I am familiar and comfortable with it.

A few thing that I want to confirm related to ACB:
1.	*I am not responsible for calculating ACBs when mutual funds are sold?* I (shouldn't) assume (so I hope) the fund company reports this. 
2.	*Calculating ACBs is not required when funds are held in registered accounts*?


Question related to *transferring non-registered funds*:

I also have actively managed mutual funds held in non-registered accounts. I plan on closing these accounts and transferring the funds to rebalance my TD portfolio. 
Aside from transfer and closing account fees, what are the potential risks/considerations to take when selling non-registered mutual funds and then purchasing more TD e-series funds to rebalance my portfolio? Specifically, capital gains. 


Thanks, 

numonee


"Read. Ask Questions. Read. Ask Questions. Read. Understand. Learn."


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## Eclectic12 (Oct 20, 2010)

yupislyr said:


> I guess it's an instance of YMMV ...
> I've had no issues from Questrade or CRA about the fee reimbursement to an already full TFSA. I suppose it's probably because it was a fee rebate, not an actual contribution by anyone.


Hopefully this is because the gov't is catching on to what can happen versus not being big enough to worry about yet.




yupislyr said:


> In the end, the OP may actually come out a little ahead as Questrade rebated me $150 but the fee TD charged was only $135.


Even better news ...


Cheers


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## Eclectic12 (Oct 20, 2010)

numonee said:


> ... *Can you please provide examples of each, simple and complicated?*


I will post separately about this part when I have more time but will answer the other questions.



numonee said:


> ... A few thing that I want to confirm related to ACB:
> 1.	*I am not responsible for calculating ACBs when mutual funds are sold?* I (shouldn't) assume (so I hope) the fund company reports this.


I have not held MFs in a taxable account but the Tax Tips web site seems to think the investor has to track it.
http://www.taxtips.ca/personaltax/investing/taxtreatment/mutualfunds.htm

I seem to recall others posting their MF company provided the ACB but I can't confirm from personal experience.




numonee said:


> ... 2.	*Calculating ACBs is not required when funds are held in registered accounts*?


Correct ... ACB matters for capital gains - which do not apply to a registered account. 
The investor may choose to track it to confirm the broker's numbers are correct but it is informational to the investor only.




numonee said:


> ... Question related to *transferring non-registered funds*:
> I also have actively managed mutual funds held in non-registered accounts. I plan on closing these accounts and transferring the funds to rebalance my TD portfolio.
> Aside from transfer and closing account fees, what are the potential risks/considerations to take when selling non-registered mutual funds and then purchasing more TD e-series funds to rebalance my portfolio? Specifically, capital gains.


If you are saying there are multiple taxable accounts - one needs to be aware of any overlap in the accounts. If mutual fund A is owned in two accounts, then the ACB is for *everything owned*. Where one is relying on the broker and MF company ... the numbers might be right due to some being in each account.

It doesn't sound like this is the case but it is something to be aware of.


Re: Capital Gains
Selling the MF to buy other investments ... unless these are a special kind of MF within the same family, means each sale is going to trigger a capital gain. 

Assuming one is okay with holding the investments, it might work out better tax wise to sell some this tax year, look for some others to sell for a loss and repeat next year. Where one sells everything in one tax year, all the capital gains will be triggered in the same tax year. For sizeable CG, this could mean being bumped up a couple of tax levels. Selling smaller chunks may add to the buying costs (ex. buy ETF three times with with commissions means 3x commission cost) but may mean overall the taxes are lower.

In a related fashion ... *if* the receiving taxable account allows the MF to be held, one can ask for the MF to be transferred "in-kind", which means the units are transferred without a sale. Transferring cash means selling that triggers a CG. As you plan for any CG, investigating which MFs *have* to be sold to move the cash over and which MFs, if any, can be transferred without a sale will help determine where there is a choice and where a CG can't be avoided.

While the MFs are being sold then transferred, there might a some time when one has cash and is out of the market. If the investments that are to be bought go down in price, one is making money, if they go up in price - one is losing a bit of money. It might not end up being a big deal but being aware of it can help choosing a bad time to start the transfer.

Are there any funds sitting in a capital loss position?
If so, selling the CL fund at the same time as selling the one in a gain will reduce the tax bill.

For example, selling stock A results in a CG of $10K while selling stock B results in a CL of $3K. Selling both in the same tax year means reporting both. The net result is CG - CL so that $10K - $3K is reported as a CG, which is the reduced amount of $7K.


Where one is forced to sell everything to transfer, it won't matter as the CLs will automatically be included. Where one is picking and choosing - pairing the CL up with CG should allow more to be moved over into the new investments.


If I think of more, I will add it ... or maybe someone who has done the same can comment.


Cheers


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## numonee (Apr 21, 2010)

Eclectic12 said:


> I will post separately about this part when I have more time but will answer the other questions.
> 
> 
> 
> ...


First and foremost, Thank You! The detailed information that you provided answered all of my questions. 

I did a few searches but was unable to find a clear cut answer as to whether or not (and I hope it’s the latter) ACB has to be calculated for mutual funds held in non-registered accounts. On some forums, others have mentioned that the fact that ACB did not have to be tracked in mutual fund accounts was a deciding factor in continuing to invest in mutual funds, as opposed to ETFs (in non-registered accounts). I will continue to research this. I may just have to call the CRA and ask. 

I have decided to keep things simple and keep the ETF portion of my portfolio in Registered accounts until I feel comfortable enough to track ACB for a non-registered account. I assume that with practice my knowledge will increase but I don’t want to risk making calculation errors and reporting them to the CRA.

Regarding selling my mutual funds held in non-registered accounts, I will take your advice: hold the investments and then sell them off slowly in following years to offset any losses/gains. I will also review to see if I can transfer any in kind to my TD Portfolio. 

See? No further questions…for now.

Thanks again, 


numonee


p.s. *Does anyone know whether or not ACB has to be calculated for mutual funds held in non-registered accounts*?


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## mordko (Jan 23, 2016)

> p.s. Does anyone know whether or not ACB has to be calculated for mutual funds held in non-registered accounts?


IMHO:

1. The answer is "yes, absolutely".

2. However, for mutual funds, calculations are done by the bank/mutual fund and (as far as I am aware) should be reliable.

3. For ETFs you should do calculations yourself. Even though your broker will provide the numbers to you, these are often wrong (especially if you own the same shares in different accounts). 

4. In particular, with ETFs, you need to ensure that you account for Capital Gains distributions and Return of Capital distributions. Nothing too complicated; Bender's White Paper explains the process in detail.


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## numonee (Apr 21, 2010)

mordko said:


> IMHO:
> 
> 1. The answer is "yes, absolutely".
> 
> ...


Thanks for responding and providing that information, mordko!

If the [ACB] calculations are done by the bank/mutual fund (for mutual funds only), where can I find/see this information? 
And, how do I report it for tax purposes? Or, do I even need to report it?
I hope that I’m not overthinking this.

Thanks, 

numonee


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## mordko (Jan 23, 2016)

You don't need to report ACB on all your stock; you only need to use that number when you sold some funds so that you can estimate your capital gains tax. 

...they will send you a statement at the end of the year and a tax form, which should show your tax liability on dividends and capital gains. At least that's my understanding; I don't own mutual funds.


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## numonee (Apr 21, 2010)

Thanks for all the information provided. 
Very useful and informative.


numonee


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## Eclectic12 (Oct 20, 2010)

Eclectic12 said:


> numonee said:
> 
> 
> > ... *Can you please provide examples of each, simple and complicated?*[/QUOT]
> ...


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