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Discussion Starter #1
Hi all,

So I have some securities held outside TFSA which was bought earlier this year. And it's time for me to contribute into this year's TFSA. I think I am allowed to make in-kind contribution (transfer from non-registered into TFSA in terms of the security) and I think the value of the security that get transferred into TFSA will be based on the current market price. This mean I'll have some "capital gain" although I dont exactly sell the security directly. But does this mean I need to pay the capital gain tax?

If so, consider the case where I have $5,000 cash that I can put into the TFSA right now. But it's likely in the next few months I'll need that $5,000 cash for something else.

Would it be better:
- transfer securities from non-registered to TFSA and keep the cash I have
- put in the cash into TFSA, and when I need that money later this year, sell some of the securities I'm holding

also, in general, is it a good idea to transfer securities into TFSA rather than cash? or is there no exact answer to such question?

Thanks!
 

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probbly a good idea to check on whether there is a fee to transfer securities in kind into a tfsa. Often there is. For some investors it would be cheaper to 1) sell securities in non-registered account, 2) transfer cash to tfsa, 3) re-buy same security in tfsa because the 2 commish would still be less than the securiies transfer fee.

re capital gain: if you transfer securities into tfsa there will be a deemed disposition, often closing value on day of transfer. If you have a capital gain you will be taxed as if you had sold these holdings, and if you have a capital loss you will be able to claim it.

re would it be better: my 1st thought was what a good job you had done analyzing your options. If it were myself, i believe i'd transfer the cash. Then i'd try unbelievably hard not to withdraw that cash during the coming year. I'd even take on a part-time extra job to avoid it, for a short period of time. TFSAs are such an amazingly good deal - not immediately but after several years, when contributions & income derived from contributions will have built up to serious levels - that some are already worrying that the government is going to close this window of opportunity.
 

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Discussion Starter #3
Thanks for the reply - when I said about putting cash into TFSA and withdraw money (through selling securities) later on, I havent decided whether to sell the securities on the TFSA or on the non-registered accounts. I can do either one of course, just have to decide what would work out better
 

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, I havent decided whether to sell the securities on the TFSA or on the non-registered accounts. I can do either one of course, just have to decide what would work out better
If you are planning on selling, and if they are the same securities in both accounts and both have gains, then selling the TFSA would seem the way to go, as you do not need to pay any capital gains on the sale.

This is assuming the cash from the sale is still in the TFSA, otherwise it may not make sense, as you then can not put $ back into the TFSA until Jan '11.
 
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