Transfer Shares to Your Registered Account, but not at a Loss!
Income Tax Act s. 40(2)(g)(iv)(A) and (B)
If you transfer shares on which you have a loss to a registered account, the loss will not be deductible.
If you transfer shares on which you have a gain to a registered account, you will have a taxable capital gain.
If you hold shares of corporations in a non-registered investment account, you can use them as your registered retirement savings plan (RRSP) contribution by transferring them to your RRSP as an in kind contribution. You can also use them as a contribution (not tax deductible) to your tax-free savings account (TFSA), or some other registered accounts. Your contribution amount is the market value at the time of the transfer. If you are transferring a bond, the market value will include any accrued interest. For tax purposes, you have effectively disposed of the shares (deemed disposition), so any gain will be taxable to you. However, if you have a loss on shares transferred to any of the registered accounts noted below, the loss is not deductible.
In most cases, unless the loss is very small, it would be best to sell the shares and contribute the cash to the registered account. If you or your spouse wish to purchase the same shares in a registered account, do not do this in the period 30 days before or after the disposal. Otherwise the loss will be considered a superficial loss and will be disallowed.
Losses are not deductible on dispositions of property to
under which the taxpayer is a beneficiary or immediately after the disposition becomes a beneficiary.
Losses are not deductible on dispositions of property to a registered retirement savings plan (RRSP) if the taxpayer or taxpayer's spouse or common-law partner is an annuitant, or becomes an annuitant within 60 days after the end of the taxation year.
You may decide for some reason to make a transfer of a loss investment to this type of account. If so, when completing your tax return, do not enter this disposal on your Schedule 3, as the loss cannot be claimed.
Tax Tip: If you have a loss on shares, don't transfer them to your registered account!
Revised: February 23, 2017
Copyright © 2002 - 2017 Boat Harbour Investments Ltd. All Rights Reserved See Reproduction of information from TaxTips.ca