Moving funds from a taxable account (Personal, Joint, Corporate) to a registered account (RRSP, TFSA, RESP) has tax consequences.
Assets can be moved from one account to another in-kind or in cash. An in-kind transfer means you are moving the holdings you have as they are into the destination account. There are no sales or purchases on the market. An in cash transfer means selling the assets for cash, then moving the cash over. Regardless of whether the assets are sold, however, there can be tax consequences.
For example, suppose you transfer 100 shares of XYZ in-kind from a taxable account to a tax-free savings account (TFSA). Let's assume the price of the shares is $100 on the date of the transfer. The Canada Revenue Agency (CRA) will consider the shares to be sold at $100, even though there was no physical sale.
If there is a gain
If the transferred asset has increased in value since its purchase, you will realize a capital gain when its sold or transferred. You'll be required to report that gain when filing your taxes. In the example above, if the shares were purchased for $75 each, you would have to claim a $25 capital gain per share, for a total of $2,500. Half of this amount ($1,250) would be added to your taxable income and taxed at your marginal tax rate.
If there is a loss
It would seem logical to think that if capital gains must be reported, then losses could be too. Unfortunately, that's not how it works. If you've sold an asset (whether the disposition is physical or “deemed”, as with an in-kind transfer), and repurchase the same asset within 30 days — again whether actually purchased or deemed — the CRA considers any loss to be superficial and denies your ability to use it to offset capital gains.
What to do
We know this stuff can be complicated. If you have any questions, please contact us here and a Relationship Manager will assist.