Q – When transferring equities in kind from a non-registered account to a TFSA, is capital gains tax payable if the value of the equities is greater than the cost base? I understand that there is no provision for claiming a capital loss if the cost base is more than the value of the equity transferred. Therefore I assume that there is no capital gain when the cost base is less. Am I correct? – John W., Calgary, Alberta
A – When a contribution-in-kind is made to a TFSA or RRSP, it is considered to be a sale by the Canada Revenue Agency. If the stocks are worth more than the cost base at the time they go into the registered plan, a taxable capital gain is triggered. But no deductable capital loss is allowed under these circumstances, which is why I always warn against transferring losing securities to a TFSA or RRSP. – G.P.
Gordon Pape is one of Canada’s best-known personal finance commentators and mutual fund experts and a regular contributor to the Fund Library. Click here to submit your question to Gordon.
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