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No More RRSP Swaps?

SkyRider

Banned
Mar 31, 2009
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Is it true that recent changes to the Income Tax Act will no longer permit you to transfer eligible securities in to your RRSP and take out the equivalent cash value?
 

oil&gas

Well-known member
Apr 16, 2002
12,221
1,618
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Ghawar
Don't know about any recent changes in rules on asset transfer to/from
RRSP account. Every once in a while I transfer stocks into my RRSP account
through a stock swap with my non-registered investment account in the same
bank.

I can see the merits in using stock/cash exchange as one way to
withdraw cash from my RRSP account, But it isn't too much trouble
to just use the cash in my RRSP account to buy the stock I intend to
transfer instead and sell the stock in my non-RRSP account at a
different time.
 

SkyRider

Banned
Mar 31, 2009
17,572
2
0
But it isn't too much trouble
to just use the cash in my RRSP account to buy the stock I intend to
transfer instead and sell the stock in my non-RRSP account at a
different time.
One issue would be paying brokerage commission on the buy and sell. Also, some potential fluctuation in value of the stock due to the timing difference between the buy and the sell.
 

raptorman

Member
Dec 26, 2007
121
11
18
That's correct. SWAPs are no longer permitted as many clients were finding tax loopholes and were inflating the size of their TFSA accounts. I know of an incident where one account got to well over $1,000,000 through swaps....imagine withdrawing that tax-free. LOL
 

oil&gas

Well-known member
Apr 16, 2002
12,221
1,618
113
Ghawar
To my knowledge stock swap with TFSA account was never allowed
from the beginning. At least that is the case with my brokerage. I can only
contribute cash to my TFSA account. Stocks or funds have to be brought
with cash within the account.
 

SkyRider

Banned
Mar 31, 2009
17,572
2
0
SWAPs are no longer permitted as many clients were finding tax loopholes and were inflating the size of their TFSA accounts.
But now Ottawa has extended the "no swap" rule to RRSP's. Where is the abuse? Let say I have BCE shares with a market value of $100,000. I transfer that to my RRSP and take out $100,000 in cash. Let say the gain on the transfer is $20,000 on which I pay the taxes. Is Ottawa concerned that the BCE shares now that they are in an RRSP will suddenly grow in value to $1,000,000? Ottawa will still get the tax when I mature my RRSP (unlike a TFSA).
 

Rockslinger

Banned
Apr 24, 2005
32,783
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For those interested, there is an article on this subject in the July 8, 2011 edition of the Globe and Mail. BTW: I spoke to my broker and he said that "in kind" RRSP contributions are still accepted.
 

Piratos

Member
Dec 5, 2001
745
16
18
On the right
The last budget introduced the concept of "prohibited investments". Shares in companies where you and related parties have greater than a 10% interest will be in that category. Your RRSP will be required to dispose of them by 2013 or face a special tax.
I believe the measure was designed to combat schemes that were using swaps of inflated value private company shares to strip cash out of RRSPs without paying tax.
 

SkyRider

Banned
Mar 31, 2009
17,572
2
0
The last budget introduced the concept of "prohibited investments". Shares in companies where you and related parties have greater than a 10% interest will be in that category. Your RRSP will be required to dispose of them by 2013 or face a special tax.
I believe the measure was designed to combat schemes that were using swaps of inflated value private company shares to strip cash out of RRSPs without paying tax.
Then Ottawa should restrict the "no swap" rule only to these "prohibited investments" but my broker is taking the view that the "no swap" rule applies to every security, even widely held publicly listed equities like BCE and Royal Bank. However, my broker said that "contributions in kind" is still fine.
 

Piratos

Member
Dec 5, 2001
745
16
18
On the right
From BMO Investorline:

The June 6, 2011 Federal budget introduced new rules for RRSPs and RRIFs, designed to prevent 'tax planning schemes' that provide RRSP/RRIF owners with an unintended tax advantage. Currently, the parameters around what is permissible and what is not remain unclear. Until further clarification is provided by Canadian Revenue Agency and/or the Department of Finance, BMO InvestorLine is taking a conservative approach to protect our clients against potential penalty taxes.
Effective August 1, 2011, all swap transactions (involving the movement of securities into or out of an RRSP/RRIF or other registered account) will be suspended until further notice.
 
Ashley Madison
Toronto Escorts