# any cap gains tax on transferring shares into TFSA?



## jargey3000 (Jan 25, 2011)

relative thinking about transferring some BCE shares she owns into her tfsa as a 2018 contr. 
how does this work? will she be hit with any cap gains tax? is it worth it? thanks.


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## heyjude (May 16, 2009)

jargey3000 said:


> relative thinking about transferring some BCE shares she owns into her tfsa as a 2018 contr.
> how does this work? will she be hit with any cap gains tax? is it worth it? thanks.


Isn’t it just a Contribution in Kind? You don’t sell any shares. I just transferred some BNS shares on TD Direct. Done and dusted.


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## AltaRed (Jun 8, 2009)

Capital gains taxes are still payable from a non-reg account. It is essentially a 'deemed' sale at FMV in non-reg and then a 'deemed' purchase at FMV into the TFSA. The only real benefit of contribution in kind is the saving of 2 commissions.


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## leeder (Jan 28, 2012)

I believe there is a tax impact even if you transfer in kind to your TFSA. My understanding is that there is a deemed disposition, which triggers capital gain upon transfer of the stock. Also, my understanding is that if the shares were at a loss when you made the transfer, you would lose the capital loss carry forward/back. I would recommend not performing the transfer due to the tax implications.


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## humble_pie (Jun 7, 2009)

jargey3000 said:


> relative thinking about transferring some BCE shares she owns into her tfsa as a 2018 contr.
> how does this work? will she be hit with any cap gains tax? is it worth it? thanks.



it's my understanding an investor contributing shares in kind to TFSA from a non-registered account will have either a) a taxable gain if closing market value on day of transfer is higher than cost base; or b) a loss that cannot be claimed if market close on transfer day is lower than cost.

b) is totally illogical. No use complaining about it, many have complained already. Income Tax acts are not supposed to be logical.

common sense says Don't do this. There are no advantages. At least none that i can see. Contribute cash to TFSA instead.


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## jargey3000 (Jan 25, 2011)

just to clarify. she doesn't really hold these in a "non-reg."-or any account , as i understand it. ie not with a broker.
she's in BCE's share purchance & DRIP program - or whatever it's called.
shares are not held in any brokerage or bank account.
does this make any difference?


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## Spudd (Oct 11, 2011)

jargey3000 said:


> just to clarify. she doesn't really hold these in a "non-reg."-or any account , as i understand it. ie not with a broker.
> she's in BCE's share purchance & DRIP program - or whatever it's called.
> shares are not held in any brokerage or bank account.
> does this make any difference?


No, it's still non-registered, and she will still have to pay capital gains on the deemed disposition.


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## jargey3000 (Jan 25, 2011)

OK
re humble's remark.... does it make any sense if she simply doesn't have the cash available to make a contribution and use up some contribution room?


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## humble_pie (Jun 7, 2009)

jargey3000 said:


> OK
> re humble's remark.... does it make any sense if she simply doesn't have the cash available to make a contribution and use up some contribution room?



actually i thought of that scenario but wanted to keep my reply brief 

there are a couple things she could do

a) borrow from a rich relative, she possibly has one who could top up her own cash with an interest-free loan

b) contribute what she can, then re-examine her budget seriously to see where to squeeze out additional savings

c) or any mixture of a) plus b)


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## andrewf (Mar 1, 2010)

jargey3000 said:


> OK
> re humble's remark.... does it make any sense if she simply doesn't have the cash available to make a contribution and use up some contribution room?


She could just as well sell, realize the gain and make a cash contribution with the proceeds. Only benefit of doing it in kind is to avoid transaction costs.


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## andrewf (Mar 1, 2010)

humble_pie said:


> actually i thought of that scenario but wanted to keep my reply brief
> 
> there are a couple things she could do
> 
> ...


There is an option d) -- sell shares in the ESOP/DRIP to fund the TFSA contribution.


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## leeder (Jan 28, 2012)

jargey3000 said:


> OK
> re humble's remark.... does it make any sense if she simply doesn't have the cash available to make a contribution and use up some contribution room?


The year is long. Does your wife work? Can she contribute a portion of her pay cheques to her TFSA? Do you have excess cash? Maybe you can gift the cash to your wife, who can use it to contribute to her TFSA. Or, as HP says, maybe you have generous rich relative from whom you can borrow.

Also, one other note... if you sell shares of company X in your nonregistered (taxable) account at a loss and contribute the money to your TFSA and repurchase the same shares of company X, that may be considered a superficial loss and you may not be eligible to use the capital loss carry forward/back.


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## Eclectic12 (Oct 20, 2010)

humble_pie said:


> it's my understanding an investor contributing shares in kind to TFSA from a non-registered account will have either a) a taxable gain if closing market value on day of transfer is higher than cost base; or b) a loss that cannot be claimed if market close on transfer day is lower than cost ...


Is the "closing market value on day of transfer" broker specific?

Calling in at 3pm on the day of transfer meant the broker asked me what price I preferred the transfer to be recorded at from the day's range to the point I called. There was no mention of the closing price (though this might have fit the range).


Now that there is an online way to do it, I would expect the same option is available but do not know.




humble_pie said:


> ... b) is totally illogical. No use complaining about it, many have complained already. Income Tax acts are not supposed to be logical.
> common sense says Don't do this. There are no advantages. At least none that i can see. Contribute cash to TFSA instead.


Or sell for cash to lock in the capital loss, contribute the cash to the TFSA and avoid the stock until enough time has passed to avoid the superficial loss rules.
https://www.taxtips.ca/personaltax/investing/transfersharestorrsp.htm


Cheers


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## Eclectic12 (Oct 20, 2010)

jargey3000 said:


> just to clarify. she doesn't really hold these in a "non-reg."-or any account , as i understand it. ie not with a broker.
> she's in BCE's share purchance & DRIP program - or whatever it's called.
> shares are not held in any brokerage or bank account.
> does this make any difference?


The shares, regardless of where they came from (ex. discount brokerage, BCE share/DRIP plan) are still deemed to be sold so there will still be a capital gain to be taxed or capital loss that won't be able to be claimed.

There may be a transfer process to get the BCE plan held shares into a discount brokerage. This may have fees though.

Selling may be easier ... but there is the risk that by the time one receives the proceeds, puts it into the TFSA and then re-buys BCE, it may be more expensive (i.e. few shares are bought in the TFSA).

Or if one lucks out, BCE drops after the sale so that one buys more shares in the TFSA.


Keep in mind that BCE's plan is quarterly so there is little control over when and how much the sale would be for.




jargey3000 said:


> ... does it make any sense if she simply doesn't have the cash available to make a contribution and use up some contribution room?


She will have to decide as there is work and trade-offs to do this versus finding other ways to come up with cash.


Cheers


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## jargey3000 (Jan 25, 2011)

my thought was: if she did transfer the shares in & paid the CG tax & fees, she could then continue on from there to reap the divvys & cap gains tax-free? no?

oh and BTW to leeder.....keep my wife outta this !!!!


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## leeder (Jan 28, 2012)

jargey3000 said:


> my thought was: if she did transfer the shares in & paid the CG tax & fees, she could then continue on from there to reap the divvys & cap gains tax-free? no?
> 
> oh and BTW to leeder.....keep my wife outta this !!!!


Apologies! When I re-read your first post, for some reason I psychologically replaced "relative" with "wife" lol.


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## AltaRed (Jun 8, 2009)

jargey3000 said:


> my thought was: if she did transfer the shares in & paid the CG tax & fees, she could then continue on from there to reap the divvys & cap gains tax-free? no?


Yeah, but it doesn't matter which way it is done, i.e. contribution in kind, or a sell externally, transfer the money in and buy the shares there. It is only after the shares are in the TFSA that cap gains and div income on a forward basis are tax free. Everything before transfer into the TFSA is taxable.


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## jargey3000 (Jan 25, 2011)

AltaRed said:


> Yeah, but it doesn't matter which way it is done, i.e. contribution in kind, or a sell externally, transfer the money in and buy the shares there. It is only after the shares are in the TFSA that cap gains and div income on a forward basis are tax free. Everything before transfer into the TFSA is taxable.


yes... that's linda my point.....
if she doesn't have the cash to put in, transfer the shares & benefit from then on....


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## heyjude (May 16, 2009)

jargey3000 said:


> yes... that's linda my point.....
> if she doesn't have the cash to put in, transfer the shares & benefit from then on....


That was my purpose in doing it. Yes, I will pay tax on the capital gains, but no, I will not have to take more money out of my RRSP (and pay a higher rate of tax on ordinary income) in order to fund my TFSA this year. And I will never pay tax on the proceeds of those shares again, unless they change the rules.


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## AltaRed (Jun 8, 2009)

jargey3000 said:


> yes... that's linda my point.....
> if she doesn't have the cash to put in, transfer the shares & benefit from then on....


Or as already been said by many, sell the shares and then move the cash into the TFSA. There is no difference one way or the other than $20 in commissions.


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## Eclectic12 (Oct 20, 2010)

Actually ... as the shares are in a company run SPP/DRIP, it may be much easier and significantly cheaper to sell the shares then contribute to the TFSA the proceeds.

The transfer option from the BCE plan is to have a stock certificate issued, which I seem to recall tacks on a fee for handling the stock certificate for most brokers.


Cheers


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## AltaRed (Jun 8, 2009)

In that case certainly. 

I don't understand the obsession with 'contribution in kind' anyway. It makes no difference from a tax perspective. 

I acknowledge there is some dead time between the date of sale of the securities in one account, and the transfer of money into the TFSA, and the market could move against you in the meantime before one can buy again in the TFSA, but I'd submit there is an equal chance of the market moving in your favour too.


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## jargey3000 (Jan 25, 2011)

Eclectic12 said:


> Actually ... as the shares are in a company run SPP/DRIP, it may be much easier and significantly cheaper to sell the shares then contribute to the TFSA the proceeds.
> 
> The transfer option from the BCE plan is to have a stock certificate issued, which I seem to recall tacks on a fee for handling the stock certificate for most brokers.
> 
> ...


If that's correct e12, it prob would be better tojust sell the shares.


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## twa2w (Mar 5, 2016)

Eclectic12 said:


> Actually ... as the shares are in a company run SPP/DRIP, it may be much easier and significantly cheaper to sell the shares then contribute to the TFSA the proceeds.
> 
> The transfer option from the BCE plan is to have a stock certificate issued, which I seem to recall tacks on a fee for handling the stock certificate for most brokers.
> 
> ...


No. No need to have a stock certificate issued. 
Just ask BCE share transfer agent( trustco I cant remember) to transfer whole shares to the DRS system and to send you a statement. They will sell any partial shares and forward proceeds to you.
Then there are some docs you fill out for your broker and send into your broker with the statement and the broker arranges transfer. Easy but it takes a little time.
I can give you more specifics later but your brokercan lead you through it and where the forms are on their system.


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## Eclectic12 (Oct 20, 2010)

BCE mentions only a share certificate being issued in their section on the DRIP plan.



> *Withdraw or sell shares from the Plan*
> 
> A participant may withdraw or sell whole common shares from his or her account under the Plan by completing the request to withdraw or sell shares form, enclosed with each quarterly statement of account and mailing it to the Agent, or by providing similar written notice to the Agent.
> 
> Upon receipt of a request for withdrawal of shares, the Agent will *withdraw the specified number of whole shares from the participant’s account and issue a share certificate to the participant*, normally within three weeks from the receipt of the request.


http://www.bce.ca/investors/dividendinfo/drp#withdrawal


It is strange that whole shares are mentioned as well as share certificates for withdrawals. Other ESP/DRIP plans have listed withdrawals where forms for the destination account are mentioned instead of share certificates.


Maybe there is a way to avoid having a share certificate issued and maybe not ... I leave that for the OP to follow up on or read the detailed documents. The high level description seems to be saying that share certificates are what the plan is setup to do.


Cheers


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## twa2w (Mar 5, 2016)

I just did an in kind transfer from BCE drip to RBCDI. No share certificate issued. No fees.
Quite simple really. Just a matter of a little time and getting the right paperwork in the right order.
If OP is interested, I will look up the docs and process.
Cheers
J


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> ... I don't understand the obsession with 'contribution in kind' anyway. It makes no difference from a tax perspective.
> 
> I acknowledge there is some dead time between the date of sale of the securities in one account, and the transfer of money into the TFSA, and the market could move against you in the meantime before one can buy again in the TFSA, but I'd submit there is an equal chance of the market moving in your favour too.


Where the stock is in the same brokerage, it is easy to do, avoids the two commissions and never being out of the market is for me, less stressful/less chance of hesitation.
Some brokers have now added the option to their web and app interfaces.

Whether it makes sense will vary by situation and investor.


Cheers


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## Eclectic12 (Oct 20, 2010)

twa2w said:


> I just did an in kind transfer from BCE drip to RBCDI. No share certificate issued. No fees.
> Quite simple really. Just a matter of a little time and getting the right paperwork in the right order ...


Weird that BCE writes it up an only being done through a share certificate. Or maybe it is the transfer agent instead of BCE's plan?

Either way ... if there is no share certificate and no fee then a transfer in-kind is cheaper.


Cheers


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## jargey3000 (Jan 25, 2011)

twa2w said:


> I just did an in kind transfer from BCE drip to RBCDI. No share certificate issued. No fees.
> Quite simple really. Just a matter of a little time and getting the right paperwork in the right order.
> If OP is interested, I will look up the docs and process.
> Cheers
> J


thanks twa... my relative's hubby is apparently trying to do this right now
he spoke to RBC about it & i think you're right...seems straightforeward as he understands it...just takes a little time
we'll see ...


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## My Own Advisor (Sep 24, 2012)

I covered this on my site FWIW a few months ago given some reader questions to me:
https://www.myownadvisor.ca/should-i-transfer-stocks-into-my-tfsa/

Pros and cons to any investing decision but as AR and others have mentioned, the big "savings" is only 2 commissions. Say $20.


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## jargey3000 (Jan 25, 2011)

My Own Advisor said:


> I covered this on my site FWIW a few months ago given some reader questions to me:
> https://www.myownadvisor.ca/should-i-transfer-stocks-into-my-tfsa/
> 
> Pros and cons to any investing decision but as AR and others have mentioned, the big "savings" is only 2 commissions. Say $20.


...it's not the principle of the thing....it's the MONEY...!!


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## AltaRed (Jun 8, 2009)

.....and a potential case of penny wise and pound foolish. Know when to save, or when to spend, $20. Skip take-out pizza for one night and the cost is covered.


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## Eclectic12 (Oct 20, 2010)

My Own Advisor said:


> ... Pros and cons to any investing decision but as AR and others have mentioned, the big "savings" is only 2 commissions. Say $20.


Where one has already determined one has to sell or move stock to make use of the TFSA, the savings is not in question ... whether the effort makes it worth it is.




AltaRed said:


> .....and a potential case of penny wise and pound foolish. Know when to save, or when to spend, $20. Skip take-out pizza for one night and the cost is covered.


Why use up part of the take-out pizza savings for five minutes work?

By my count, it has taken about thirty minutes to save $100 in commissions ... no deductions from other savings required.


Cheers


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## My Own Advisor (Sep 24, 2012)

AltaRed said:


> .....and a potential case of penny wise and pound foolish. Know when to save, or when to spend, $20. Skip take-out pizza for one night and the cost is covered.


Yup - know when to save, know when to spend. You and others in CMF have that mastered given what you have accomplished. 

The rest of us younger folks are just aspiring to "get there"!


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> Where one has already determined one has to sell or move stock to make use of the TFSA, the savings is not in question ... whether the effort makes it worth it is.
> 
> 
> 
> ...


We are 4 pages into this thread. I suspect the OP has already spent hours wrestling with this issue, never mind the research the actual investor has likely already invested in pursuit of this decision. Execution might take 15 minutes. Getting ready for it is taking hours, days, maybe weeks.


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