Personal Income Tax - RRSPs and RRIFs - Stocks, Bonds etc. -> Transfer shares to registered account, but not at a loss!
Transfer Investments to Your Registered Account, but not at a Loss!
Income Tax Act s. 40(2)(g)(iv)(A) and (B)
Registered accounts include:
- registered retirement savings plans (RRSPs),
- registered retirement income funds (RRIFs),
- tax-free savings accounts (TFSAs),
- registered disability savings plans (RDSPs),
- registered education savings plans (RESPs), and
- deferred profit sharing plans (DPSPs).
If you transfer shares or other investments on which you have a loss to a registered account, the loss will not be deductible.
If you transfer shares or other investments on which you have a gain to a registered account, you will have a taxable capital gain.
If you hold investments in a non-registered investment account, you can use them as your registered retirement savings plan (RRSP) contribution by transferring them to your RRSP 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 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 any gain will be taxable to you. However, if you have a loss on investments transferred to any of the registered accounts noted below, the loss is not deductible.
Losses are not deductible on dispositions of property to
under which the taxpayer is a beneficiary or immediately after the disposition becomes a beneficiary.
Losses are 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, unless the loss is very small, it would 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.
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.
Tax Tip: If you have a loss on shares, don't transfer them to your registered account!
Revised: July 14, 2018
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