What if I have an unrealized loss one year, and then gain it back the next year and sell it all. Is it a wash? or because the gain comes in a different calendar year I have to claim it?

Any help with this would be greatly appreciated.

I am trying to work the TFSA into my portfolio and was curious about what type of investments are most tax efficient to place inside. I can see the benefit in placing bonds inside the TFSA – interest is no longer taxable at income rate. What about stocks?

Unused TFSA contribution room
The amount, either positive or negative, at the end of a particular calendar year after 2008, determined by the holder’s unused TFSA contribution room at the end of the year preceding the particular year

PLUS
the total amount of all withdrawals made under the holder’s TFSA in the preceding calendar year, other than a qualifying transfer;
the TFSA dollar limit for the particular year if, at some point in that year, the individual is at least 18 years old and a resident of Canada. In all other cases, the amount is nil.

MINUS
the total of all TFSA contributions made by the holder in the particular year excluding a qualifying transfer or an exempt contribution.

Under proposed changes announced on October 16, 2009, certain withdrawals made in the previous year may not be added back in the following year, after that date. The exclusion in the first bullet above also applies (after that date) to:

* withdrawals of amounts included in the definition of “advantage”,
* amounts upon which income tax was required to be paid by the TFSA trust; and
* any other income related to those amounts.

Under the first bullet point, it is important to determine how the $1000 in your example was made. If it falls under the condition of “advantage” then it can’t be used in your next years TFSA’s contribution room.

cheers…

Michael

The problem people get into is when they withdraw funds from a TFSA, and then re-contribute them in the same calendar year. This is considered an overcontribution by the CRA and subject to a penalty tax.

So, If I withdrow 11000$ will I be able to add up 11000$ to my 2011 contribution room?

The contribution room is per-person, not per-account. If you have multiple TFSA accounts, you need to track the contribution room across all of the accounts to avoid an over contribution (and penalty tax) situation.

Contribution room is a measure of how much you can add to your TFSA(s) in a given year, not a measure of how much is already in the account(s).

I wanted to open a TFSA and contribute $5k because I thought that if I withdraw it, then next year I would be able to contribute $10k.

But, the lady at the bank told me that the TFSA started last year and so my contribution room for this year $10k and next year it would be $15k. Therefore, I didn’t have to open a TFSA now, and just open one next year while still having an contribution room of $15k.

It this the correct understanding of the TFSA?

Thanks for your help!

In the normal course you can withdraw money from your TFSA and re-invest it, but you need to be careful not to exceed the contribution limits. If you withdraw money from a TFSA, the withdrawal amount isn’t added to your contribution room until the next calendar year.

“Under proposed changes announced on October 16, 2009, certain withdrawals made in the previous year may not be added back in the following year, after that date. The exclusion in the first bullet above also applies (after that date) to:

* withdrawals of amounts included in the definition of “advantage”,
* amounts upon which income tax was required to be paid by the TFSA trust; and
* any other income related to those amounts”

What is the definition of “advantage”? I have tax advantage saving account with cibc. Does it mean that If I withdraw my money I cannot reinvest it?
Thank you