Home -> Personal Income Tax -> Registered Savings Plans -> Stocks, Bonds etc. -> Transfer shares to registered account, but not at a loss (usually)!

If you hold investments in a non-registered investment account, you can use them as your Registered Retirement Savings Plan (RRSP) or First Home Savings Account (FHSA) tax-deductible contribution by transferring them to your account as an in-kind contribution, as long as they are qualified investments. You can also use them as a contribution (not tax deductible) to your Tax-Free Savings Account (TFSA), or some other registered accounts. Your contribution amount is the market value at the time of the transfer. If the investment being transferred is foreign shares, the contribution amount is the market value converted to Canadian funds at the exchange rate at the time of the transfer. If you are transferring a bond, the market value will include any accrued interest.

For tax purposes, you have effectively disposed of the investment (deemed disposition), so the transaction will be treated as if you sold the investment at fair market value.

Transfer of Shares With Unrealized Gains

If you transfer shares or other investments on which you have a gain to a registered account (or to someone else other than your spouse or common-law partner), you will have a taxable capital gain, but see below re the tax documents provided by your brokerage.

Transfer of Shares With Unrealized Losses

If you have a loss on investments transferred to any of the registered accounts noted below, the loss is not deductible. This rule is called a stop-loss rule.

Losses are not deductible on dispositions of property to:

Deferred Profit Sharing Plan (DPSP)
Employees' Profit Sharing Plan (EPSP)
Registered Disability Savings Plan (RDSP)
Registered Retirement Income Fund (RRIF)
Registered Retirement Savings Plan (RRSP)
Tax-Free Savings Account (TFSA)
First Home Savings Account (FHSA)

under which the taxpayer is a beneficiary or annuitant or immediately after the disposition becomes a beneficiary or annuitant.

Losses are also not deductible on dispositions of property to a registered retirement savings plan (RRSP) if the taxpayer or taxpayer's spouse or common-law partner is an annuitant, or becomes an annuitant within 60 days after the end of the taxation year.

In most cases, it would probably be best to sell the investment and contribute the cash to the registered account. If you or your spouse wish to purchase the same investment in a registered account, do not do this in the period 30 days before or after the disposal. Otherwise the loss will be considered a superficial loss and will be disallowed.

However, each taxpayer should consider all factors for their own situation before deciding whether to either:

transfer the loss shares and not claim the loss,
sell the loss shares and contribute cash to buy a different investment,
sell the loss shares and contribute cash to buy the same investment after 30 days,
transfer a different investment, or
do nothing

Several factors could make the transfer in #1 above less costly than #2 or #3 above:

brokerage costs of both the sale and purchase transactions may exceed the amount of tax you would have been able to save by deducting the loss, after calculating your marginal tax rate x 50% of the loss, or
possible loss of income from the investment during the 30-day period, or
exposure to possible price increase during the 30-day period

Tax Tip: Depending on your circumstances, avoiding the transfer of loss shares may not be your best option.

In-Kind Transfers to Registered Education Savings Plan (RESP)

Note that although losses on in-kind transfers to an RESP are not affected by s. 40(2)(g), these losses will be considered a superficial loss and thus not deductible, according to Tax Interpretation 2010-0352921E5 - Transfer of securities into an RESP.

In-Kind Transfers Not On Your T5008?

Your brokerage will issue a T5008 and a trading summary showing your purchases and sales of investments in your non-registered account, to help you prepare Schedule 3 of your tax return. In-kind transfers may not be shown on these documents - they weren't in prior years, but at least some brokerages are including these now on T5008s. You are still required to report these disposals on Schedule 3 if they are in-kind transfers to your registered accounts, or to someone else's account.

According to CRA, deemed dispositions do not have to be reported on a T5008. This would include in-kind transfers. They are still dispositions for tax purposes. See link below re in-kind transfers to a TFSA.

Recording the In-Kind Transfer of a Loss Investment on the Tax Return

You may decide for some reason to make a transfer of a loss investment to this type of account. If so, when completing your tax return, do not enter this disposal on your Schedule 3, as the loss cannot be claimed. If you still want to enter the disposal on Schedule 3, you must not show a loss for it.