Say I were to just start my TFSA this year. I put in the currently available $20,000 in to some stocks. Since the market is kinda low right now, let’s assume that by the end of the year a fair amount of appreciation has occurred. The stocks, which I bought at the start of the year, are now worth $50,000.

Can I “lock in” my extra TFSA room by doing an in-kind transfer of those TFSA shares into a standard investment account on Dec. 31, 2012, then re-contribute them Jan. 1, 2013?

If I understand the logic correctly, this should mean that my contribution limit would forever be increased to $55,000 ($50,000 withdrawn + $5,000 from the next year), which is $30,000 higher than it should be. Seems like a smart move to make?

And on the same note, lets say that instead of those shares increasing to $50,000, they tank to $10,000. If on Dec. 31, 2012 I withdraw those shares out and into a standard investment account, then on Jan. 1, 2013, the maximum I can contribute to my TFSA is now $15,000 ($10,000 withdrawn + $5,000 from the next year), which is $10,000 lower than it should be?

If that’s the case, then it seems to me that it is very punishing to withdraw money from a TFSA if you are in a year where you are taking a loss – and conversely, it is highly profitable to do so if you are taking a gain.

That was a potential, high risk strategy. However, CRA implemented a new 100% tax on TFSA profits of overcontributions. If you make $100,000 profit, you will have to pay all of it to CRA.

On the upside – the financial institution won’t stop you. On the downside – 100% tax is definitely a deterrent. :)

Ed

sorry – answered my own question. Any overcontribution gain loopholes have been closed :)

If I want to put in say $50,000 into a self directed tsfa, which others have implied they have done, can I at my discretion, or will the financial institution be able to stop me?

(then with the plan to invest in a stock at my risk that couldbe a 4-5 bagger and then just withdraw the 50,000 in a few month and pay the penalty)

Say I have $15,000 with BMO TFSA savings account this year. At the end of this year, if I withdraw $10,000 from BMO and put it in questrade tfsa, in Jan 1 2012, can I put in another $5000 (new year’s room) with BMO TFSA savings account? Am I allowed to have 2 TFSA accounts with 2 different institutions?

Let’s say you provide your spouse with $5K for TFSA contribution in early 2010 (using up contribution room). Then in late 2010 the spouse withdrawals the $5K thereby, leaving recontribution room of $5K. Are you allowed to give them money for the recontribution room as well as the inital contribution?

If anyone has received a letter recently about overcontributing to your TFSA, CRA has indicated that they will reverse the penalty if you write in.

Apparently, about 70,000 Canadians overcontributed, which is a lot. Most were working with banks, which clearly meant they were not getting any advice.

Many people did not realize that you only get new room the following year after a withdrawal. However, you can transfer a TFSA to a new financial institution without affecting your room.

However, that may take longer than just cashing in your investments and moving them and might involve a transfer out fee, but transferring your TFSA is the right way to do it.

If your overcontribution was innocent (not deliberate) and resulted from you now know the rules, when you receive a letter from them about the penalty, just write in quoting their reference number and explain what happened. Stress that it was innocent and that you did not know the rules (assuming that is the reason).

CRA has indicated that they will routinely reverse these penalties, but they will do it on a case-by-case basis.

The best idea is to send in the money for the penalty along with your appeal letter. They will refund it to you assuming they agree with your appeal. By sending in the penalty amount, you can avoid the risk of additional late fees and interest if they should disagree with you.

Ed

where as if i didnt sell – the stock could fall and no gain in cont room.
where as if i do sell – the stock say continues to gain, well then my cap gets even bigger.

seems like a no brained to me!

1. Say my TFSA stock investment is at its peek and I am anticipitating a sharp decline next week. Should I sell it now and rebuy when low. Can I keep on making these gains on the same stock as oppurtunity comes (say I am smart enough to predict the fluctuation) without any penalty or taxable gains ? …..

2. I feel I have been really dumb to treat my TFSA as a typical savings account (i.e. untouched until year end) and only trading mostly through non-TFSA account. If 1. is true, then I should be doing maximum of my trading thru TFSA account, rght ?
thanks – RD

How do you benefit? Unless you are wanting to reduce your position in ABC (a winner) and shift to other assets, what you have at the end of the year is what you have at the beginning of the next year ($30k).