# Transfering USD to TFSA



## namelessone (Sep 28, 2012)

Just wondering if I transfer USD cash from unregistered account to TFSA, does it trigger currency exchange capital gain/loss? I ask this because when we transfer stock position from unregistered account to registered account, the position is deemed as sold. 


Thanks


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## My Own Advisor (Sep 24, 2012)

Deemed dispositions, as far as I know, are reported in CDN $$.


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## RBull (Jan 20, 2013)

How does cash trigger a capital gain or loss?


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## My Own Advisor (Sep 24, 2012)

Don't know RBull...."deemed as sold" from the OP implies you sold something, a security, not cash.


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## RBull (Jan 20, 2013)

My Own Advisor said:


> Don't know RBull...."deemed as sold" from the OP implies you sold something, a security, not cash.


Sorry, my question was for the OP. 

They are trying to compare a transfer of stock from unregistered to registered account to transfer of cash into a TFSA. This situation doesn't seem to have any relevance to each other. The questions to me seems to be how did a capital gain or loss on currency happen in the unregistered account and why would someone want to transfer US cash into a TFSA. The fact it's going into a TFSA seems irrelevant.


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## My Own Advisor (Sep 24, 2012)

All good...I don't know if the OP is reading this stuff? Hopefully


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## namelessone (Sep 28, 2012)

RBull got it. My question is concerning whether the FX gain/loss applies at the instance when I transfer USD cash to TFSA. 
I want to avoid the FX capital gain/loss because it's a pain to keep track of ACB of my USD cash. 
Note that that USD cash remains as USD cash in TFSA when transferring. I'll do something with it later. The reason I want to do that is if it doesn't, then I convert the USD to CAD inside the TFSA when needed to avoid the FX tax. 

And If stocks are considered sold when transferring to the registered account. I am wondering if transfering USD cash to TFSA is also considered converted back to CAD cash?

Currency Gains and Losses, the Technicalities:
http://www.taxspecialistgroup.ca/public/taxPerspectives.asp?art=144


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## humble_pie (Jun 7, 2009)

i think the practical risk in this exercise is the likely FX fee that all brokers other than the small list of those that offer dual-currency registered accounts are going to charge on this proposed USD cash transfer into a TFSA.

the dual-currency brokers include bmo investorline, royal bank & questrade. The list might include virtual brokers, i can't confirm. Q-trade reportedly offers a USD RRSP but charges for the same.

other brokers are likely to impose an FX fee at varying rates. Some of our members have reported that some brokers now have favourable FX rates for registered accounts. However most brokers other than those mentioned above are still offering mono-currency registered accounts, so a currency conversion from USD into CAD will have to take place.

BTW an FX fee charged by a broker is not an "FX tax."


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## humble_pie (Jun 7, 2009)

it's true that currency traders & speculators declare capital gains/losses & pay tax on gains when appropriate.

we small retail investors are supposed to declare capital gains whenever we dispose of a significant inventory of foreign currency that has risen in value over CAD.

but most retail investors don't hold big blocks of foreign currencies as speculations. Most would hold USD in the form of US securities. Currency fluctuations would automatically be built into the gain/loss calculation for each such security.

put another way, the CAD cost of acquiring such security in USD would include the FX rate in effect at the time of acquisition; while the CAD proceeds from selling such security in USD would also include the FX rate in effect at the time of disposition.

since TFSAs are still smallish & don't normally involve transfers of humungous amounts of cash, i don't believe that retail investors need to concern themselves with small fluctuations in CAD/USD for smallish amounts.

here is the CRA interpretation bulletin on foreign currency gains/loss reporting. One will see that the tax authorities allow an envelope - about $200 in gains - which taxpayers don't have to declare on any inventory of foreign currency such as USD that they keep on hand, often for travel or shopping purposes. I for one believe that, in ordinary retail investing, with retail investors who are not professional currency traders, the boundaries of such envelope get pushed outwards a bit.

http://www.cra-arc.gc.ca/E/pub/tp/it95r/README.html

as i've mentioned, i believe the real risk to the OP in his proposed USD cash transfer into a TFSA - unless it's a bmo, roybank or questrade dual-currency account - is likely to be the healthy 1.50% FX fee that the broker is going to wallop him with.


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## namelessone (Sep 28, 2012)

Thanks for your input humble_pie. 
The $200 exemption is something new I learned today. 
After some reading and thinking, I agree this FX gain/loss is a non issue for retail investor unless a large amount of USD cash ( at least $5000 USD cash) is held in unregistered account for extended period of time resulting significant FX change. Stock transaction will take care of the FX for the duration of the stock position. So if I keep the USD cash in registered account and no cash in unregistered account. The problem is solved. No record keeping for the ACB of USD. 

As for the FX fee charged by brokerage firms, I intend to try the Norbert's Gambit at some point. And I have Questrade, Itrade and recently just opened RBC direct investing. I will gradually move toward RBC DI. 

I am still in early stage of investing and the size of my portfolio will not become significant until another 10 years. Avoiding investment tax is not a matter of saving money, it's about time spent on keeping record and filing tax. Time is more valuable than little money saved.


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## humble_pie (Jun 7, 2009)

namelessone said:


> I agree this FX gain/loss is a non issue for retail investor unless a large amount of USD cash ( at least $5000 USD cash) is held in unregistered account for extended period of time resulting significant FX change


i would say more like $50,000-100,000 or more would have to be held as cash for an extended period of time, during which there would have to be a currency deviation significant enough to generate a capital gain or loss on the currency itself.




> Stock transaction will take care of the FX for the duration of the stock position


exactly




> So if I keep the USD cash in registered account and no cash in unregistered account. The problem is solved. No record keeping for the ACB of USD


i would say that if we are talking about $5k or $10k, one could keep that as cash in registered or unregistered without sweating mothballs over whether to declare capital gains/losses in non-registered acount ...




> As for the FX fee charged by brokerage firms, I intend to try the Norbert's Gambit at some point. And I have Questrade, Itrade and recently just opened RBC direct investing. I will gradually move toward RBC DI


i don't have direct experience with the RBC gambit platform but they say it works like BMO. The BMO platform works like a dream. Buy in one market, sell instantly online in opposite market for 2 low-cost online commissions, no phone calls required.

tentatively, i'm of the belief that one *could* inject US dollars directly into an RBC TFSA *without* their charging a nasty FX fee to convert this into CAD. Since they do offer dual currency registered accounts. But you really should phone them to confirm all this.

i don't believe such a transfer would work at scotia iTrade. I believe such injection would be converted to CAD & would trigger an FX fee.

re questrade, not sure. I do believe, however, that questrade is one of the worser brokers for gambit/currency arbitrage trading. Worser as in more cumbersome, awkward, far more restrictions, much slower, days to journal positions.

btw you do know that at RBC you can gambit currencies instantly, online, in non-registered accounts as well? same thing at BMO. No need to phone or pay an agent's commission.

it's the TD where the difference exists between registered accounts (easy online gambit trading) & non-registered accounts (client must phone agent for the sell side & pay the higher agent's commission.)

best wishes with your portfolio. You've already developed a fine eye for detail.

PS if you are a new investor with startup accounts as you mention, i hope you won't mind if i say that 3 different broker accounts are perhaps one too many each:


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## RBull (Jan 20, 2013)

namelessone said:


> Thanks for your input humble_pie.
> The $200 exemption is something new I learned today.
> After some reading and thinking, I agree this FX gain/loss is a non issue for retail investor unless a large amount of USD cash ( at least $5000 USD cash) is held in unregistered account for extended period of time resulting significant FX change. Stock transaction will take care of the FX for the duration of the stock position. So if I keep the USD cash in registered account and no cash in unregistered account. The problem is solved. No record keeping for the ACB of USD.
> 
> ...


I am also with RBC DI. 

You are on the right track keeping US cash in registered. This is what I do. 

Norberts Gambit is very simple but one must also be very careful. In the past several months I have gambitted some substantial $ several times and know it works well with RBC DI.

Here is a link that you can use. 

https://www.pwlcapital.com/en/Advisor/Toronto/Toronto-Team/White-Papers

Just scroll down and they have a specific process for each bank with actual screen shots. I use DLR & DLR.u since it doesn't mess up my ACB vs stock for RY for example (which I used to use)


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## namelessone (Sep 28, 2012)

humble_pie said:


> PS if you are a new investor with startup accounts as you mention, i hope you won't mind if i say that 3 different broker accounts are perhaps one too many each:


I think the idea of diversification was hardwired into my brain before I got into investing. (Laugh) 
I had bank card from TD, RBC, from years ago.(Currently using PC for shopping and scotiabank for mortgage). Surprisingly, TD deactivated my account because I haven't used it for 3 years and RBC still allows me to use the access card after 4 years of inactivity. It seems my impression on RBC was right. They offer top notch service. 

At the beginning, Questrade was my choice based on cost alone. It served me well. It satisfies my need to buy and sell stocks. I don't need to use their support service. Recently, they raised the interest rate and makes me want to switch to IB in the future for margin account and close it for good. Itrade was opened years ago thinking it's the next level up from Questrade. I was wrong. It's just not up to my expectation in terms of USD account and account opening experiences and the trading fee is too much. I just keep it there and leave it alone because I have mortgage with them and it's conveniently to able to instantly transfer cash from their margin account to bank account. I also don't want to spend the fee to transfer so all stocks can be at one place. 

RBC DI is the best of them. Cheap commission and good platform. Not sure about BMO, I don't want to open another bank account. 


@Rbull,

Thank you for your link. It seems like a simple process. 
I am using margin to get more USD so I don't see myself converting a lots of USD to CAD anytime soon. But I like to convert some USD to CAD occasionally when the rate is good. I like to invest in US market because there are more opportunities there and we can get a bonus of 10 to 20% from FX.


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## RBull (Jan 20, 2013)

namelessone said:


> @Rbull,
> Thank you for your link. It seems like a simple process.
> I am using margin to get more USD so I don't see myself converting a lots of USD to CAD anytime soon. But I like to convert some USD to CAD occasionally when the rate is good. I like to invest in US market because there are more opportunities there and we can get a bonus of 10 to 20% from FX.



You are welcome. Bonus can also be a curse but if careful often can help. 

G/L


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