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Hi,

Does anyone know if I can use my TFSA as a way to invest in a non-public company that is issuing shares? Basically, I am about to invest in a company that has issued shares only to the people who have formed the company. I will be the first outside investor.

I was wondering if there was any way I could shelter my possible gains (no snickering!) in my TFSA? Looking at this article, it seems unlikely, but I thought I'd ask the opinion of others.

Thanks!
Sean
 

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I don't know ... CRA says:

Generally, the types of investments that will be permitted in a TFSA are the same as those permitted in a registered retirement savings plan (RRSP). This would include:

cash;
mutual funds;
securities listed on a designated stock exchange;
guaranteed investment certificates (GICs);
bonds; and
certain shares of small business corporations.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/nvstmnts-eng.html


Tax Tips also lists
... RRSP qualified investments ...
http://www.taxtips.ca/tfsa/investments.htm

Where under their RRSP page, the list includes
... under certain conditions, shares of small business corporations
... under certain conditions, shares of venture capital corporations
http://www.taxtips.ca/rrsp/qualifiedinvestments.htm



The CRA interpretation bulletin that is linked to in the article suggests that as long as the OP is not a connected shareholder (or is a connected shareholder with arm's length dealings and less than $25K aggregate cost) then the criteria is:

... "small business corporation" is defined, in general, as a Canadian corporation (other than a corporation controlled at that time, directly or indirectly in any manner whatever, by one or more non-resident persons) all or substantially all of the fair market value of the assets of which is attributable to assets that are:
used principally in an active business carried on primarily in Canada by the corporation or by a corporation related to it;
shares or debts of connected small business corporations; or
a combination of the above two.
http://www.cra-arc.gc.ca/E/pub/tp/it320r3/it320r3-e.html#P105_10842


Definitely a lot of factors to consider but so far, as long as it's a corp - it might be okay.


Cheers
 

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I find this thread interesting. I'm just wondering if anyone would know the answer to this - if one purchased in the shares of a CCPC that was eligible for the TFSA or RRSP, how would one have the shares journaled over to actually be held in the registered account? I couldn't imagine it could be held in a discount brokerage account - perhaps in some sort of Computershare type account?
 

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... no idea ... I suspect most discount brokerages won't want to deal with CCPC shares on a one-of type basis so I suspect there may not be privileges for this type of investment, or where there are privileges there likely will also be hefty fees.

Computershare or similar is a possibility .... but I believe they are typically driven by the particular company contracting their services.
I haven't seen any references to existing large companies that have setup a share purchase/DRIP program expanding into an RRSP. So likely the same barriers to the more established RRSP are likely to apply to the newer TFSA.


This may end up being one of those "it is technically possible" but only a few with connections can actually do it type scenarios.


Cheers
 

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I am thinking, too, that the only instance where the use of a registered account for shares in a CCPC would be useful is if the CCPC distributes significant non-eligible dividends (or eligible if the investor is taxed at a high marginal rate). If no dividends are paid, then the investor would be better holding the shares outside the registered accounts to take advantage of the LCGE.
 

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Questrade will do it for you. . . Canadian controlled private corporations (CCPC) fee $250.00 + $100.00 annually
 

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^^^^

Some account privileges don't come cheap.

I am not surprised at the one time fee but am surprised at the annual fee. This definitely seems to be aimed at reducing the number of investors who use this possibility.


Cheers
 
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