Asset transfer (swap) transactions
Asset transfer transactions, also known as swap
transactions, are transactions where property is transferred out of an
account, and cash or other property is transferred into the account.
These transfers, for instance between a TFSA and another registered
account such as an RRSP, are not treated as a withdrawal and
recontribution, but as a purchase and sale.
Amendments proposed to the Income Tax Act on October
16, 2009 would prohibit asset transfer transactions between registered or
non-registered accounts and TFSAs. The prohibition would apply to
transfers between accounts of the same taxpayer or that of the taxpayer
and an individual with whom the taxpayer does not deal at arm's
length.
The proposed amendments would apply tax at a rate of
100% of the amount of the asset transfer transaction, for transactions
occurring after October 16, 2009.
Where the asset transfer transaction has occurred
inadvertently after October 16, 2009, the Minister of National Revenue may
waive or cancel all or part of the tax payable, if the taxpayer promptly
rectifies the situation by restoring each account to its position before
the asset transfer occurred.
Note: These rules do not apply to in kind
contributions or withdrawals of property to or from a TFSA. An in kind contribution
or withdrawal is
different from a swap transaction, because nothing
is being transferred (swapped) out of or into the TFSA in return for the
contribution or withdrawal.
Department of Finance information
