# Day trading and RRSP/TFSA



## Rommel

Does anyone know of the rules concerning day trading in a registered account with the CRA?

If I make a lot of trades inside my RRSP and TFSA accounts, are those subject to the Day Trade rules within the CRA?

I apologize if this has been asked lots before, I could not find much information in my searches.


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## OptsyEagle

No. All that CRA cares about is what money went into an RRSP and what money goes out. There are also some rules on the types of investments you can hold in an RRSP, as well.


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## Charlie

CRA uses the 'day trade rules' to determine if your gains are income or capital. Since there's no difference in the taxation of income or capital gains earned within RRSPs or TFSAs those rules have no bearing on trades inside those accounts.


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## Rommel

Sweet deal!

Thanks guys! I hope to one day return the favor for your help


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## Square Root

Keep in mind that any losses will not be deductble other than in the reduction of your RSP and ultimate RSP withdrawals. Losses while day trading are pretty likely too. Should you be risking your retirement assets this way?


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## Eclectic12

Square Root said:


> Keep in mind that any losses will not be deductble other than in the reduction of your RSP and ultimate RSP withdrawals. Losses while day trading are pretty likely too. Should you be risking your retirement assets this way?


True ... though another question is do any of the brokers allow day trading? 

Someone else posted a while back that the brokers usually settle the trades based on T+3, so it sounds like "just under a week trading" may be as close as one can get.

Has anyone investigated the possibilities?


Cheers


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## Fain

Square Root said:


> Keep in mind that any losses will not be deductble other than in the reduction of your RSP and ultimate RSP withdrawals. Losses while day trading are pretty likely too. Should you be risking your retirement assets this way?


Since day-trading can be more profitable for alot of traders, it makes more sense to do it in RRSP/TFSA because of the tax advantage. 

Let them do Buy and Hold in an unregistered account.


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## Assetologist

Fain said:


> Since day-trading can be more profitable for alot of traders, it makes more sense to do it in RRSP/TFSA because of the tax advantage.
> 
> Let them do Buy and Hold in an unregistered account.


http://investorhome.com/daytrade/profits.htm


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## cardhu

Eclectic12 said:


> Someone else posted a while back that the brokers usually settle the trades based on T+3, so it sounds like "just under a week trading" may be as close as one can get.


There's no problem buying/selling within the same day, in an RRSP - you can't do a Norberts Gambit without.



Fain said:


> Since day-trading can be more profitable for alot of traders, it makes more sense to do it in RRSP/TFSA because of the tax advantage.


*Some *day traders make money ... most do not ... and there is no way for a trader to know in advance which group he'll be in ... so no way to know in advance whether doing it in RRSP/TFSA would offer any tax advantage.


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## OhGreatGuru

You forgo the ability to claim capital losses.
Net capital gains outside of a registered account are taxed at a 50% inclusion rate.
Capital gains inside a registered account will ultimately be taxed at a 100% inclusion rate when withdrawn.

So it is not necessarily a "sweet deal".


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## cardhu

OhGreatGuru said:


> Capital gains inside a registered account will ultimately be taxed at a 100% inclusion rate when withdrawn.


Fallacy ... the tax paid at withdrawal is offset by the tax not paid at contribution ... the net effect, when the tax rates are the same at contribution and withdrawal is that capital gains are ultimately taxed at ZERO percent when withdrawn.


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## atrp2biz

That would be on the contribution amount. 

The gains (if any) would be taxed as income upon withdrawal. So one has to offset the differal of taxes vs. being taxed as income.


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## Square Root

Fain said:


> Since day-trading can be more profitable for alot of traders, it makes more sense to do it in RRSP/TFSA because of the tax advantage.
> 
> Let them do Buy and Hold in an unregistered account.


I think most day traders lose money eventually.


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## cardhu

atrp2biz said:


> That would be on the contribution amount.


No, it would be on the entire content of the RRSP, including investment returns. 
The tax not paid at contribution IS the deferral that offsets withdrawals being taxed as income. 
Comparative tax rates determine the degree of offset.


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