January 15, 2019

This man’s stocks rocketed. Can he move them to a TFSA at purchase price?

Trying to move shares that have increased in value from a private placement into a TFSA is an enviable problem. Unfortunately, there isn’t a way to transfer them at the lower purchase price, and avoid a capital gains tax because a transfer is considered a disposition of these assets at their fair market value. However, there are still ways to reduce the tax and maximize the financial benefits to investors who find themselves in this position. First, you can account for any expenses you incurred, and these costs can be subtracted from the transfer value to reduce the tax owing. In addition, only 50% of the increase will be taxable because of the way capital gains are taxed.

Key Takeaways:

  • While you can’t adjust the sale price or what you paid for the shares, you may be able to reduce your taxes.
  • If you have RRSP contribution room, then the benefit of moving it there instead of a TFSA is that the RRSP tax refund will be larger than the capital gains tax owing.
  • To further maximize the benefit of moving it into your RRSP, the RRSP tax refund could be used to contribute to your TFSA.

“Buy stocks low in a private placement and you could be lucky enough to face a problem if they have grown into something much bigger by the time you move them into an investment account”

Read more: http://www.moneysense.ca/columns/ask-moneysense/minimize-taxes-on-transfer-of-shares-to-tfsa/

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