TFSA, tax loss selling and counting of RRD purchases


To take advantage of the drop in stock prices that can occur due to the tax loss selling season, I would like to buy a stock in my Tax Free Savings Account on December 30 or December 31. Then on January 1, I make my annual TFSA contribution of $ 6,000 to pay the transaction on time for the settlement date, two business days after the purchase. Is it possible?

I doubt your broker will allow you to buy a stock before there is enough cash in your TFSA. But there is a simple workaround: Buy the stock from your unregistered account now. Then after January 1, call your broker and pay the in-kind stocks to your TFSA. The fair market value of the shares at the time of the transfer will be your TFSA contribution. Be aware, however, that if you buy $ 6,000 in shares, they could appreciate and exceed your TFSA limit when you transfer them. So consider buying less than $ 6,000 of shares. You can also create additional TFSA contribution room for 2021 by withdrawing money from your TFSA in December. The value of the withdrawal will be added to your contribution room as of January 1. So, for example, if you withdraw $ 500 in cash now, you will be able to make an in-kind contribution of up to $ 6,500 in shares as of January 1 (This assumes that you have reached your maximum TFSA contributions over the years. previous years and that you have no additional TFSA rights.)

I will be contributing $ 6,000 to my TFSA at the beginning of January. If I borrow to make my contribution, is the interest on the loan tax deductible? If not, do I have to buy $ 6,000 of shares in my non-registered account, using my line of credit, and then transfer the shares in kind to my TFSA?

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If you borrow money to invest in a TFSA or other registered account, the interest is not tax deductible. If you borrow to invest in a non-registered account, the interest is deductible (as long as the investment generates income or there is a reasonable expectation that it will in the future). However, the interest would cease to be deductible once you transfer the shares to your TFSA.

How do you calculate the adjusted cost base of a stock purchased under a bi-monthly purchase program and an employee dividend reinvestment plan over a long period? The program includes several stock splits during my participation in the plan.

Calculating your ACB may not be as expensive as you think. First, determine the total amount that you have invested. Don’t worry about stock splits or calculating the exact number of stocks you’ve acquired with each bi-weekly purchase or quarterly dividend reinvestment; just add up the total amount you spent. Second, determine how many stocks you currently own. Third, divide the total dollar value of your purchases by the number of stocks you currently own. This is your ACB per share. Keep in mind that your ACB per share will change slightly each time you make a purchase, so you will need to update your ACB to calculate your capital gain when you plan to sell shares. If you do not have a record of your purchases, your program administrator may be able to provide them to you. (For more on calculating your ACB, including what happens when you only sell a portion of your shares, read my column here.)

The superficial loss rules of the Canada Revenue Agency, which you discussed it in a recent columnapply to transactions in my Tax-Free Savings Account? I might want to sell a stock, even at a loss, in my TFSA because I’m sure I can buy back the same stock a day or two later for a lower price.

Losses inside a TFSA (or registered account) cannot be used to offset capital gains in a non-registered account. So, no, the shallow loss rules don’t apply to TFSAs. The CRA doesn’t care if you sell a share in your TFSA and buy it back a few days later, a few weeks later, or a few months later. You cannot use the loss under any circumstances.

I have stocks in my (non-registered) cash account with a loss that I would like to trigger. Several weeks ago I bought additional shares of this company in my TFSA and intend to sell the shares in my account for cash after 30 days have passed to trigger the loss. Is this an acceptable approach?

Yes. As long as you do not buy the same shares within 30 calendar days before or 30 calendar days after the sale (depending on the settlement dates of each trade), you have no superficial loss and you can claim the loss at for tax purposes. . Remember that to do this, the last transaction date for settlement in 2020 is December 29.

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Send your questions to [email protected]. I am not able to respond to e-mails personally, but I choose certain questions to answer in my column.

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