Comments on: TFSA Contribution Room

By: FrugalTrader

FrugalTrader — Mon, 08 Feb 2010 19:50:09 +0000

Erin, you will face a 1%/month penalty for over contributed amounts.

By: Erin

Erin — Mon, 08 Feb 2010 19:46:41 +0000

Hi,
I am looking for advise if i overcontributed in 2009. Do i need to take the money out or will it now be considered contribution for 2010. Is there a cost for overcontributing?

By: FrugalTrader

FrugalTrader — Thu, 15 Oct 2009 16:09:18 +0000

Ardee, any transfers of stock would be calculated at its value at the time of transfer. In this case, any profits on the stock on the date of transfer will result in capital gains tax payable.

By: ArDee

ArDee — Thu, 15 Oct 2009 15:46:31 +0000

A similar question as robaan. I just opened questrade TFSA account and I want to move my posiitons from regular to this TFSA account.

1. Should I move stocks upto $5000 based on their current market value or should I calculate them on the initial purcahed value.

2. Is there a tax on moving position that have already had capital gain. Some of my stocks that I want to move are already up 15% since I bought 2 months back.

please advise.

thanks- RD

By: robaan

robaan — Mon, 24 Aug 2009 20:09:39 +0000

I am doing stock trading through my TFSA account that I opened with Questrade.com. At one point I got into a situation where I deliberately overcontributed (extra 20K) into my TFSA account so that I could get into an interesting stock. Now (3 weeks down), I want to fix that situation by transferring the over contributed funds into a regular stock trading account (that I opened with Questrade in the last 3 weeks).
Questrade allows me to transfer the funds or the stock positions from one Questrade account to another (TFSA to non TFSA) without any problem.
Do you know if I have to follow some Govt. procedure outside of Questrade account to communicate this to Govt as well. or is it just sufficient to transfer over contributed funds or stock positions out from TFSA account into a regular account to avoid any penalties.

By the way I have confirmed with Canada revenue agency, they charge 1% monthly penalty on your overcontributed amount in TFSA account.

By: DK

DK — Thu, 29 Jan 2009 17:23:03 +0000

Maggie,

Yes its true. You will see this reflected yearly in your Notice of Assessment which will indicate your TFSA contribution room, similar to how it is currently done for RRSP contribution room.

By: maggie

maggie — Thu, 29 Jan 2009 16:18:38 +0000

I have been told by one institution that even if you don’t open your TFSA this year you still accumulate the $5,000 room every year. So, if you were to open your account in 2011 you would have accumulated $15,000 in contribution room.

Is this true?

By: nobleea

nobleea — Tue, 27 Jan 2009 04:07:48 +0000

if you made a million dollars, i think increasing your contribution room wouldn’t be on the top of your mind.

if you made a million dollars in a TFSA, why would you take it out? just to put it back in? what point does that serve, other than having a million dollars in a taxable account for up to a year while your new contribution room shows up. you take it out, get a million dollars in contribution room next year, and then put it back in and reduce the contribution room by a million dollars. net gain is zero.

i think people are making too big of a deal about the ‘withdraw to increase your contribution room’.

By: setting it straight

setting it straight — Tue, 27 Jan 2009 03:42:02 +0000

Your contribution room each year is made up of the total of three amounts:
1. The TFSA dollar limit for the year (which is $5,000 for 2009 but will be indexed to inflation each year thereafter and rounded to the nearest $500);
2. Any withdrawals made in the previous year, and
3. Any unused contribution room from the previous year.

Therefore, you make a million dollars, withdraw it, you can re-contribute it the following year. That would be under Section 2 which states “ANY withdrawals made in the previous year. NOT any withdrawal limited to you max contribution. I think ANY sums it up. That is from CCRA website. This is the best thing that our gov has done for us in years. Abuse it while you can because you never know what “crack pot” NDPers will form gov in the future and change these rules.

I know it’s hard to believe…but this is AWESOME!

By: cannon_fodder

cannon_fodder — Sun, 18 Jan 2009 19:04:07 +0000

Maggie,
Is it possible to have the money from distributions invested into a money market mutual fund at BMO? Would that solve your problem?

By: maggie

maggie — Fri, 16 Jan 2009 21:30:34 +0000

I just talked to someone from a BMO local branch and he told me that they have tried to allow the distribution in the form of cash but their system will only allow reinvestment. Too bad they will not allow this as it would be a much better way to earn a higher rate of interest on your investment.

By: nobleea

nobleea — Fri, 16 Jan 2009 21:08:22 +0000

that defeats the purpose of a monthly income fund. it shouldn’t matter where the income fund is located, in a TFSA, RRSP, RRIF, or even an unregistered account. if it’s an income fund, it should pay out income (cash).

i think BMOIL is either misunderstanding you, or being lazy.

By: maggie

maggie — Fri, 16 Jan 2009 20:53:50 +0000

nobleea-

I have been told by BMO Investorline that I cannot put the monthly income in as cash and that the only choice I have is to do the reinvestment.

Would you know if RRSP’s allow you to put monthly income in as cash? I am asking because I am assuming the TFSA has similar rules concerning investments.

By: nobleea

nobleea — Fri, 16 Jan 2009 20:49:07 +0000

maggie;

No, there is no chance this would create penalty of over contribution. Once the money is in the TFSA, any gains (through capital gains or dividends, or interest) is yours to keep, tax free.

By: maggie

maggie — Fri, 16 Jan 2009 20:45:44 +0000

In my TFSA account I would like to purchase a monthly income mutual fund with the $5000. I do not want extra units purchased with the monthly income. I would like the income to be deposited into this TFSA account each month in cash so that in the future I could purchase some other investment.

QUESTION: Am I allowed to put the monthly income in as cash? Is there any chance that doing this would create a penalty of over contribution?

By: Joe

Joe — Thu, 08 Jan 2009 03:39:40 +0000

Thanks for the response and that is great news. This is especially true if you don’t attain the age of majority until 19 as in some provinces. Therefore, you can open an account when you hit 19, but still have contribution room of $10,000. Lastly, I didn’t mean to suggest that you need income to contribute to a TFSA, but it appears that you need to file a personal tax return in order to realize the contribution room. CRA must have a way of tracking these TFSA accounts.

By: cannon_fodder

cannon_fodder — Thu, 08 Jan 2009 03:30:59 +0000

Joe,

Income is not a prerequisite for having TFSA room. AFAIK you do not need to open a TFSA until you are ready. At that point you will have accrued contribution room for all years up to that point in time.

By: Joe

Joe — Thu, 08 Jan 2009 02:43:32 +0000

If I don’t open a TFSA account in 2009, but I open a TFSA account in 2010 – do I still get my contribution room for 2009. Assume that I file tax returns in both years, because that appears to be one of the conditions that CRA is imposing.

Thanks, Joe

By: DAvid

DAvid — Fri, 02 Jan 2009 01:46:37 +0000

coinsaver,
Read about Manitoba’s Credit Union Deposit Guarantee Corporation to gain more understanding of the guarantee. Each province seems to have similar protections — I know BC does!

Few of us participating on this blog are Financial Advisors, and most of are are self taught amateurs. IF you wish advice or guidance, I recommend you engage the services of a CFA. Reading the information on this and other blogs will give you some background to understand what exactly the advisor presents to you.

DAvid

By: coinsaver

coinsaver — Fri, 02 Jan 2009 00:11:06 +0000

thanks guys.

i have always maxed out my rrsp but i hold it in GICs in an rrsp account. I have never touched stocks or mutual funds. Just cash, gic and gold/silver.

i have stayed out of debt as i live very modestly so i don’t have any.

I looked at outlookfinancial.com and their rates are better than PC Financial and ICICI. But I notice they are a credit union rather than a bank. Would my deposits
be protected by a credit union as well as a bank with CDIC ? They gurantee this up and down on the credit union website but how can I be sure of their gurantee? With all the collapses going on, I fear I may lose my savings if the credit union goes
belly up.

I’d like to be a little less conservative and invest in stocks with the 5K account. Could you guide me on how to go about doing this or am I getting in over my head?