Overview

There are tax implications for moving money from a non-registered account to a registered account, such as a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). Continue below to learn about in-kind and in-cash transfers, and how these transfers can affect your taxes.  

Understanding account transfers

When you move assets between accounts, it's called an internal transfer. This transfer can happen in one of two ways:

• In-kind transfer: This means moving your current holdings directly into the new account without selling them.  

• In-cash transfer: This involves selling your assets for cash and then transferring the cash to the new account.  

Regardless of whether you choose an in-kind or in-cash transfer, there may be tax consequences.

Understanding capital gains and losses

Both in-kind and in-cash transfers can result in you realizing a capital gain or loss. Continue below for more information and to learn how to report a capital gain or loss.

Capital gains

Even if you don't sell your assets during an in-kind transfer, the Canada Revenue Agency (CRA) may still consider it a sale for tax purposes.  

• For example, if you transfer 100 shares of XYZ from your non-registered account to your TFSA, and the shares are worth $100 each at the time of transfer, the CRA will treat this as if you sold the shares for $100 each.

If the value of the asset has increased since you bought it, you'll realize a capital gain when it's sold or transferred.  

• For instance, if you bought the XYZ shares at $75 each and transferred them when they're worth $100 each, you have a capital gain of $25 per share. For 100 shares, that's a total capital gain of $2,500.  
• You'll need to report this gain when you file your taxes. Only half of the capital gain ($1,250 in this example) is added to your taxable income and taxed at your marginal tax rate.

Capital losses

If you sell an asset at a loss, you might think you can claim a capital loss to offset other gains. However, the CRA has specific rules about this. If you sell an asset (or it's considered sold in an in-kind transfer) and then buy the same asset again within 30 days, the CRA may consider this a superficial loss. If this happens, you can't use the loss to reduce your capital gains.

Reporting capital gains or losses

To report capital gains (or losses), you need to complete Schedule 3. This form calculates the amount of your taxable capital gain (or allowable capital loss). The net result from Schedule 3 is then reported on your T1 General tax form. For detailed information on how to report capital gains, please visit the official CRA website: Calculating and reporting your capital gains and losses.