# TFSA stock dividends | gains | losses reporting?



## razz (Oct 21, 2014)

Hi Folks, 

Filling out my taxes and I wondering if one needs to claim/report any of the gains/losses/dividends which are held in a TFSA account? Does anything need to be reported from the TFSA account to the CRA?

Regards, 
razz


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## Eclectic12 (Oct 20, 2010)

No ... it is not taxable by Canada so gains/losses/dividends/foreign tax paid are of no use.

Where one withdraws from the TFSA, one has to remember to add back the withdrawal as contribution room *the following year* but that's for one's benefit, not for the tax return.



Cheers


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## humble_pie (Jun 7, 2009)

razz said:


> Does anything need to be reported from the TFSA account to the CRA?



as eclectic says, No.

isn't it wonderful? a TFSA is that rarest of rare items. a genuine tax break for ordinary citizens. please take every advantage.

.


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## razz (Oct 21, 2014)

Eclectic12 said:


> Where one withdraws from the TFSA, one has to remember to add back the withdrawal as contribution room *the following year* but that's for one's benefit, not for the tax return.
> Cheers


If one was to have their money appreciate much more than the allowed TFSA total which is now $46.5K (2009 to 2016). Lets say one has $100k in a TFSA account, and withdraws that $100K in 2016. In 2017 one is only allowed to contribute $46.5K + 2017-contributions and not the $100K + 2017-contributions. Am I understanding that correctly?


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## Spudd (Oct 11, 2011)

razz said:


> If one was to have their money appreciate much more than the allowed TFSA total which is now $46.5K (2009 to 2016). Lets say one has $100k in a TFSA account, and withdraws that $100K in 2016. In 2017 one is only allowed to contribute $46.5K + 2017-contributions and not the $100K + 2017-contributions. Am I understanding that correctly?


No, you are allowed to contribute the 100K + 2017-contributions.


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## Eclectic12 (Oct 20, 2010)

razz said:


> If one was to have their money appreciate much more than the allowed TFSA total which is now $46.5K (2009 to 2016) ...


The TFSA contribution limit is a *contribution* limit. 
As long as one respects the limit for contribution ... that is all that matters from the gov't's perspective from a $$$ perspective.

Putting in $5K to a TFSA is going to use up $5K of one's TFSA contribution limit ... what happens to that $5K investment is irrelevant tax wise. In my case, I bought in early 2009 for $5K, cash paid while I held it totaled $2K. When sold that added another $14K. I then withdrew the total of $16K to pay off my mortgage early.

From a tax perspective ... the taxes on the $5k were already paid when I made the contribution. There were no taxes for the $16K I withdrew after withdrawal, the $$ earned no income.

From a TFSA contribution perspective, the $5K contribution used up $5K TFSA contribution room from what I had been granted for the year of the contribution, plus two years held and the year of the TFSA withdrawal. The *year following the withdrawal*, the $16K withdrawal become TFSA contribution room, in addition to the TFSA yearly amount granted that year plus any unused previously granted room.


(seen next post for a sample calculation using the chequebook method as this is getting too long a post)


Cheers


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## Eclectic12 (Oct 20, 2010)

razz said:


> Lets say one has $100k in a TFSA account, and withdraws that $100K in 2016.
> In 2017 one is only allowed to contribute $46.5K + 2017-contributions and not the $100K + 2017-contributions. Am I understanding that correctly?


There is not enough information to tell ... you are not listing what TFSA contribution room had been earned and used up.
It looks wrong as the "$46.5K + 2017 contributions" is not right. I suspect you mean "unused TFSA contribution room already earned + 2017 TFSA contribution room earned" but that is also not correct as it is missing "last years withdrawals being added back as contribution room" as well as "subtract contributions made".

The "TFSA is worth $100K is irrelvant" to whether or not the contribution limit has been respected for the contributions. Having made a $100K TFSA withdrawal automatically means the following year, $100K of TFSA contribution room is made available for use.


I find it far easier to treat the TFSA contribution limit like balancing a cheque book as it avoids getting caught up in the irrelevant TFSA FMV.


Say our person that makes the $100K withdrawal, turned 18 in 2011 and made no TFSA contributions until July 2015.
Total TFSA contributions = unused contributions earned + previous years withdrawals - current year contributions

The withdrawals and contributions are zero so each year's allotment (assuming one qualified at the start of each year) is simply adding up each year's worth.
Total TFSA contributions on Jan 1st, 2015 = (2 x $5k for 2011, 2012) + (2 x $5.5K for 2013, 2014) + (1 x $10K for 2015) = $31K

After the July 2015 TFSA contribution of $6K is made ... 
total TFSA contributions on Aug 1st, 2015 = unused contribution - contributions made this year (withdrawals don't factor in yet as it is $0).
= $31K - $6K = $25K.

After a Nov 2015 TFSA contribution of $12K is made ...
total TFSA contributions on Dec 1st, 2015 = unused contribution - contributions made this year (withdrawals don't factor in yet as it is $0).
= $25K - $12K = $13K.

Notice that the available TFSA contribution room is dropping by the amount of the TFSA contribution being made.


Our fictional investor has been conservative, so the interest paid is minimal, so that FMV of the TFSA on Dec 1st, 2015 is the $12K + $6040 = $18,040.


Our investors decides to gamble on a penny mining stock that Dec tax loss selling drops in value. The TFSA FMV is now down to $13,720.

Total TFSA contributions on Jan 1st, 2016 = unused contributions earned + previous years withdrawals - current year contributions
= $13K + $5.5K + $0 - $0 = $18.5K

A buyout is announce in Sept 2016, the previous dog mining stock is now worth $100K. The investor sells in Oct 2016 for cash. FMV for the TFSA is $100K.

TFSA contribution limit is still $18.5k.


Investor wants to pay off mortgage, withdraws $100K from the TFSA in Nov 2016. FMV of TFSA is $0.
On Dec 1st, 2016 .... TFSA contribution limit is still $18.5k.


*Jan 1st, 2017* ... is where the withdrawal comes into play.
Total TFSA contributions on Jan 1st, 2016 = unused contributions earned + previous years withdrawals - current year contributions
= $18.5K + $5.5K + $100K - $0 = $124K.


Hopefully it is clear that the contribution limit is about contributions ... not the investment values of what's held in the TFSA.


Cheers


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## Eclectic12 (Oct 20, 2010)

Spudd said:


> No, you are allowed to contribute the 100K + 2017-contributions.


That's one possibility ... the other is that there was unused TFSA contribution room (not likely with $100K TFSA FMV but it is possible).

If there are any, then the 2017 TFSA contribution room = 2016 $100K withdrawal converted to contribution room + 2017 allotment (if one qualifies) + unused TFSA contribution room.


Personally, I prefer the formula to be more like:
Today's Available TFSA contribution room = unused TFSA contribution room + last year's withdrawal + Current Year Allotment - just made contributions

Where one is not keeping number up to date as each contribution is made or a new calendar year starts ... one is at risk of over-contributing.

If CRA decides it is an honest over-contribution, the penalty is 1% of the over-contribution *per month*, which adds up quickly.
If CRA decides the over-contribution was an attempt to gain an unfair advantage, they can charge 100% of gains made.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/txtn/txtn-eng.html
http://www.taxtips.ca/tfsa/overcontributions.htm


It is so much easier to keep a running total, similar to balancing a cheque book that I wonder why so many are over-complicating things by tracking room granted that a contribution has already used up. Perhaps someday I will understand.


Cheers


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