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Curious to know if anyone is thinking of using this strategy. Let's say you have a TFSA with a discount brokerage and, starting with a $5000 investment, you grew it to $8000. What I'm thinking of doing is withdrawing just the profit I made on the original investment, and putting it into an RRSP, for the tax refund, then using the refund to put back into the TFSA.

Let's say you withdraw just the profit from your TFSA, or $3000. You are not charged capital gains on this since it's in a TFSA. Now you take the $3000 and put it into your RRSP (assuming you have contribution room). Let's say your marginal tax rate is 22%. Putting that $3000 in your RRSP reduces your taxable income by that amount, and ends up adding 22% x $3000 = $660 to your refund. At refund time, take that $660 and put it back into your TFSA.

To me, the advantages to this are:
-In effect, you have increased your RRSP's size by $3000, but only reduced your TFSA's size by $3000-$660 = $2340.
-You don't have to lose any of the securities (or whatever you are invested in) you owned in your TFSA since you can just re-buy the same ones in your RRSP (assuming you have an appropriate RRSP account that allows you to do that)
-If you contribute regularly to an RRSP, you can instead take the money you would have used and contribute it to your TFSA to rebuild up to the amount you withdrew in the previous year (plus another $5000 in 2010) without worrying about the RRSP since you already put in a lump sum of $3000

Of course, you will be taxed when it comes time to take money out of your RRSP, but now you have an additional $3000 of capital in there that you didn't have before, and if you're young enough, many years left to grow it.

What do you think of this strategy? Pros? Cons?
 
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