I’m sure that other people have thought of this and it is illegal in some way, under the GAAR probably? Anyway… TFSA’s have an over contribution charge of 1% per month I believe.
Scenario: It’s December 1st, option expiry is December 16th, there is a stock at $20, with call options going for 1.00 at the 20 dollar strike. You deposit 50,000 in your TFSA, buy 2500 shares, sell covered calls to get 2500 dollars. The next trading day after expiry, you withdraw the 50,000 (assuming the stock hasnt moved lower, humor me) plus the 2500 in premiums.

The result is:
a. You walk away with 2500 dollars?
b. You walk away with 2500 dollars less 500 dollars for the 1% overcontribution charge?
c. You walk to court because the CRA is after you?

TIA

More like you cannot double-dip – having tax-free income/cap gains AND having tax-deductible interest.

You need to choose one ;)

If you are doing the smith manouvre, would it not make the most sense to use your HELOC to maximise your TFSA? For example, questrades tax free “trading” account. This way the portfolio you end up with at the end of your smith manouvre mortgage (which is hopefully larger than your HELOC) can be withdrawn tax free to repay the HELOC and have a nice tax free chunk of change to keep investing with.

If you can transfer the options into your TFSA (i.e. they qualify as acceptable investments that can be held in a TFSA) then you should be able to do what you say.

I just don’t know how you can transfer them into a TFSA. Only once was I ever offered stock options in a company I worked for. They never moved into the money but if I remember correctly, they were held by a US brokerage. I was thinking that I would simply exercise them at the brokerage rather than transfer them.

Let us know what you find out.

I am not sure but I think that TFSA works the same as RRSP. You just have to tell them how much you put in the TFSA and how much you have taken out. The rest, you don’t have to tell them about that.

But I am not sure.

As I knew and read here the gain made in a TFSA is tax free. But now my question: Will you have to report the potential income to the CRA even if you don’t have to tax them?

Or do we just keep the TFSA unmentioned?

To my knowledge, you cannot claim capital losses which come from a TFSA.

Thanks a lot,
Dale

Yes

“So if I, let’s say, open a TFSA savings account with ING with the max value of 5K, will I be able to withdraw and move it to ICICI in the middle of 2009?”

You can TRANSFER it to ICICI, likely for a fee. If you withdraw it and open a second TFSA, you would pay a 1%? penalty on a $5000 over contribution. It would be seen as having two TFSA open with $5000 in each. Interestingly, the transfer fee is often equal to (you guessed it) 1% of the max contribution.

“But if I withdraw my TFSA fund from ING, would I have to wait until next year before I can deposite it into my new ICICI TFSA account?”

Yes. You could withdraw on December 31, and deposit on January 1, to minimize the uninvested time.

DAvid