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moneysense.ca, 16/11/08
Ideas for your Tax-Free Savings Account (TFSA)
When the Tax-Free Savings Account (TFSA) was announced in Budget 2008, the Government called it “an RRSP for everything else in your life”. While the TFSA provides tax sheltering just like a RRSP or a RESP, the flexibility it offers will justify the hype surrounding it and allow us to use it more widely than its registered brethren:
Emergency funds: Since emergency funds are typically kept in savings accounts, they attract tax at the marginal rate on interest payments, guaranteeing a loss in purchasing power over time. The flexibility of the TFSA – no tax on withdrawals and the contribution room for the next year bumped up by the withdrawal amount – make it a perfect candidate for stashing emergency savings.
Saving for a home: The Home Buyers’ Plan (HBP) allows first-time buyers to withdraw up to $20,000 ($40,000 for a couple) from their RRSP but first-time buyers wanting to save even more or buyers trading up to another home should save in a taxable account with all its attendant disadvantages. The TFSA could be an ideal place for such savings and unlike a HBP, there is no repayment schedule to worry about.
Other short-term savings: As the TFSA is very flexible, it can used for all kinds of savings such as a new car, a boat, a dream vacation or that around-the-world-trip that you’ve always been dreaming about. Admittedly, the $5,000 contribution room in the first year wouldn’t go very far but the TFSA can add up to some serious chunk of cash in a few short years.
Saving for your child’s education: The RESP is still the best place to save for a child’s education because any contribution attracts the Canada Education Savings Grants (CESG) resulting in an immediate boost of at least 20%. With the introduction of the TFSA, it is best to contribute enough to the RESP to get the maximum allowed CESG of $7,200 per child (for a total RESP contribution of $36,000) and save more inside a TFSA.
Retirement savings: Since withdrawals from a TFSA do not affect income-tested benefits such as OAS or GIS, the TFSA is likely to supplant RRSPs entirely for lower income Canadians. RRSPs are likely to remain the preferred vehicle for retirement savings for Canadians in the higher income brackets. But for those who max out their RRSPs every year, the introduction of the TFSA is equivalent to adding $8,300 to the RRSP contribution room.
Initially, we plan to keep our emergency savings inside a TFSA but in subsequent years we will be contributing securities currently held in taxable accounts in-kind to a TFSA. What do you plan to do with your TFSA account?
moneysense.ca, 16/11/08
Is it true that dividends received from a Canadian company can actually reduce your tax if you are in the lowest income tax bracket? If so, would it be best just to hold interest-bearing savings in the TFSA?
I’m keeping it simple for the first year. I’ve opened an ING direct TFSA and will be putting my emergency fund there. After the first year I’ll be putting savings for my next car in there.
I had originally planned to repay my HBP load as soon as possible. However, now I’m thinking about paying the minimum each year and collecting the extra in my TFSA. I’ll be able to take advantage of growth outside of my RRSP to lower the total amount that needs to be repaid.
Guys I have 3 questions and an answer
The answer is that I will probably put these money in a savings account, term deposit, GIC something like that.
1. Do you have any idea, can you also use USD in these TFSA or just CAD?
2. CC why is interest you earn on a saving account taxed at your marginal rate? Is it considered a capital gain? Meaning they ax you at marginal rate but only on 50% of what you earned in interest for the year?
3. Just to make sure I understand this right. Everything you make on these money is tax free right? Meaning you put 5000 in the first year. At the beginning of next year you have say 5300 (the initial 5000 and 300 in interest). Then you are allowed to add another 5000. So is this the true power of this? meaning your accumulated interest you still keep inside of it and it does not influence annual contributions no? And the same is for RRSP no?
I’m torn about what to do with the TFSA. I will either use it as an account to save for large purchases (like a condo), or as additional retirement savings.
I’m not sure I completely understand how this all works, but it seems that the way to maximize the TFSA’s usefulness is to grow the value of the account. After all, the more room you have in your TFSA, the more investment income can be sheltered from tax.
Here are two hypothetical scenarios:
Person A uses the TFSA to hold GICs accumulating interest at 4% annually. Each year he adds the maximum contribution of $5000. After 20 years the maximum space in the TFSA will have grown to approx. $153,357. ($5000 yearly contribution limit + space created by interest earned in the account.)
Person B uses the TFSA to hold equity that grows at an average of 8% annually (wishful thinking!). Each year he adds the maximum contribution of $5000. After 20 years the maximum space in the TFSA will have grown to approx. $228,810.
Even if you ignore the substantial difference in gains over the 20 year period, Person B now has way more space available in the TFSA. This would mean that in future years, Person B can shelter a lot more of their investments from tax than Person A. Isn’t this the real power of the TFSA?
Sorry about the long post. I’ve really been racking my brain over this and I’d appreciate opinions. Is there something I’ve missed here?
Remus: For #2 unfortunately, no, interest income is treated the same as employment income, so it’s fully taxed at your marginal rate.
For the first year I’ll put my emergency/medium-term savings/cash funds in the TFSA, but I don’t anticipate needing/wanting $10k in cash/fixed income at my age, so by year 2 I’ll probably be throwing equities in there.
I’m another one who set up my TFSA for an emergency fund, taking advantage of ING Direct’s offer to double my interest if I set it up this year instead of next (they will roll it over to an “official” TFSA in January 2009 and double whatever interest I’ve earned since I started the account, which won’t be much because I only started it a month or so ago).
One thing that’s a little unclear to me: can I have several TFSAs, as long as I stay within my total annual maximum contribution level of $5K? So, for example, once I amass $15K or so in my emergency fund, can I just stop contributing to it and open a new TFSA for another purpose and contribute $5K per year to that?
Geron:
It used to be true that for people with incomes in the bottom two or three tax brackets recieving dividends actually resulted in a tax credit that could be used to reduce other taxes. However, in the most recent budget the Conservatives raised the tax on dividends which brought that ‘tax credit’ for lower tax brackets down to zero. It now means that every tax bracket pays a little bit of tax on dividends, the lower tax brackets only pay a few percent in tax. Although just looking up Ontario tax rates for 2007 and 2008 on http://www.taxtips.ca it looks like there is still a tax credit for the bottom two tax brackets so I could be wrong…
Chris: Your example only looks at half or a third of the story. One aspect you aren’t considering is taxes. Person A would have to pay tax at their marginal rate for the interest they collected on their emergency fund. So the tax savings on interest income is higher than Person B’s tax savings on their capital gains. The other thing you haven’t considered is risk. If we had TFSA’s for 20 years already and Person B had that $228k at the beginning of 2008, how much would they have now? If they are down 30% they would only have around $136k, less than Person A. Of course we are going through an extreme lesson in risk right now but it does a pretty good job of illustrating the point.
Finally, brad: Yes, you can have multiple TFSA accounts, just like you can have multiple RSP accounts as long as you stay under your contribution limit for all the accounts. In other words, you can only contribute $5,000 a year (plus anything you may have withdrawn in pervious years); if you choose to spread that over 1, 2 or 10 accounts, that is your choice.
I wanted to open my TFSA as a stock trading account, but because of my job, I am restricted (long story). Anyway, we decided that my husband would open his TFSA at TD discount brokerage and hold mainly agressive stocks. I’ll open my TFSA at Manulife Bank and use it as our emergency fund money (I have a high interest account at Manulife Bank so will just make a transfer Jan 2). That keeps us covered at least for year one. As the pot grows bigger (i.e. contribution room), and once I’m able to open a trading TFSA I will probably have one for savings and other for building investments.
Geron: 0xcc covered the major point — taxes on dividends are going up. Regardless, it is best to hold investments that attract the highest tax — fixed income, high-dividend foreign stocks inside a TFSA. If RRSPs and TFSAs are all maxed out, then it may be best to keep Canadian stocks in taxable accounts to take advantage of favourable treatment of dividends.
Remus: I haven’t heard about a USD TFSA. Interest from savings accounts, GICs or bonds do not have any favourable tax treatment. But capital gains (typically from stocks) and dividends from Canadian stocks are treated much more favourably. That is why it is best to keep fixed-income assets in tax-sheltered accounts like RRSP, RESP and now TFSA.
You are right about your comment #3. However, there is one key difference between a TFSA and RRSP — any withdrawal from a RRSP does not create new contribution room but a withdrawal from a TFSA does. That’s why TFSA is so much more flexible.
Chris: Yes, a TFSA invested in higher growth assets will become larger and provide a larger tax-free income stream (provided the rules aren’t tweaked in the future). If the risk is appropriate then holding fixed income in a RRSP and riskier assets in TFSA might be appropriate.
brad: Like 0xcc pointed out, you can have any number of TFSA accounts, as long as the annual contribution limits are adhered to.
Is it possible to open a TD e series mutual fund TFSA account? Will the process be complicated?
Mintycake- Does TD charges management fees for opening a TD Waterhouse TFSA account that start off with 5000 initial deposit? Access to TD e series is my biggest concern right now and TD Waterhouse discount brokerage will allow me to buy stocks in the future, which is wonderful a few years down the road.
I think TD e series is great since it would allow me to do some general market timing with low fees and a good Canadian bond index fund to act as the money market fund. I know that not everyone agrees that marketing timing is a good idea, but I think a disciplined approach to rebalancing can decrease risk and volatility, while enhancing returns.
I have researched a bit on Dale’s October strategy. I have to say that I agree with him to a certain extent and especially if most people are not aware of the data. I like the idea of missing September and October, since they historically have done very, very poorly. At the same time, I would sell before August if a peak is in sight.
I agree with Chris that growing TSFA account would be very beneficial in the long run.
Where does “TFSA is equivalent to adding $8,300 to the RRSP contribution room” come from? Isn’t it like adding a $5,000 contribution room?
Carl: RRSP contributions are made with before-tax dollars and TFSA contributions with after-tax. Assuming a 40% tax rate, a $5,000 TFSA contribution is like bumping up the RRSP contribution room by $8,000 ($5,000/0.6).
CC,
The TFSA DOES NOT provide tax sheltering just like a RRSP or a RESP as stated in the introduction of this post. That being said, I love your blog and suggestions.
Olivier
ING DIRECT
I plan on buying $5,000 of an income trust to my tfsa.
Prolly something like Interpipe. 10% per year, and chance for capital appreciation. Since it is tax-free income, doesn’t the return of capiyal issue become moot?
slick
Olivier: Sure it does. There is no tax on earnings within a TFSA and withdrawals are not subject to tax. Here’s what Budget 2008 said about the TFSA:
“Contributions to a TFSA will not be deductible for income tax purposes but investment income, including capital gains, earned in a TFSA will not be taxed, even when withdrawn”.
http://www.budget.gc.ca/2008/pamphlet-depliant/pamphlet-depliant2-eng.asp
Why do you think TFSA doesn’t provide tax sheltering?
slick: Yes, the ROC is a moot point for investments held within a TFSA (just like it is for RRSPs and RESPs).
Econ, TD hasn’t announced their rules yet, but my husband has his non reg and reg with them so even if there were fees I’m hoping they would waive them for clients with over $100K (which he has there), similar to BMO.
I plan to sell off $5000 worth of non-RRSP investments (in my case, TD e-funds), book a capital loss, and then repurchase these investments in my TFSA. I’ll wind up where I started, but with a sizeable capital loss for future use.
Given the likelihood of one’s portfolio being devalued at present, this seems to me to be the best use of the TFSA for anyone with a non-RRSP portfolio.
CC: I see. You’re looking at the future value, when getting money out of the TFSA vs the RRSP. You have a good point.
That said, the RRSP, with it’s tax deductions, gives you the possibility to put more money aside compared to the TFSA. That’s if you are disciplined enough to put the tax return in a RRSP or TFSA.
But since you where talking about someone having all his RRSP contributions maxed out, you are right.
DtillaxB: You have to be careful when playing with capital losses like that. Your capital losses will be denied by the CRA if you re-purchase the same stock you claimed a loss on within 30 days of selling it. In fact, the loss will be denied if your spouse re-purchases the same stock you sold within 30 days. So make sure you don’t get caught in that situation.
DtillaxB: 0xcc is right. It used to be that you can sell a security in a taxable account and purchase it within a registered account. Not anymore. Purchase or sale within a RRSP now comes under the superficial loss rule.
0xcc/Capitalist: Thanks for pointing that out to me – that’s really good advice.
[...] Capitalist has some Ideas for your TFSA , which are quite good. I am still not sure what type of account we may open and how might use it, [...]
[...] The Canadian Capitalist has some ideas for your TFSA. [...]
What are the rules around transfering accounts? I’m assuming the banks will become more competitive or will be able to change their rates at any given time (like regular savings accounts)? In other words, if I decide to move TFSA $$ from ING to say BMO because of better rates – can I do so? Is there a fee?
It is mislesading to suggest that the RESP is the best place to save for a child’s education with the 20% boost from the government. That is only the case if your child progresses successfully through four years of post secondary school in four years, and for the average child, that is a crap shoot. For example, if your child attends a year of university and then switches to a first year college program, nothing is paid until the student hits second year at college. RESPs are a scam. Read the fine print!
@Parent Steve: What you are describing are RESP scholarship trust fundation. I would not go with those and I would almost go as far as you do and call them “scams”.
If you read the minimal requirements on the gouvernment side, you’ll see that the rules are a lot less strict than the ones these trusts impose on you. There are alternatives. For example mutual funds, self directed accounts, etc. Read about it.
Concerning the 20% to 40% contribution from the government, they are a great thing to get of course. That said, if you have a lot of cash you can inject in those for a long time, taking into account compound interest that are not taxed, the best inversment might not (I should say is not, but it depends on many things) be to invest in a way to maximise the contribution from the government.
Does the TFSA use up RRSP contribution room? If I contribute $5000 to a TFSA will this mean I will have $5000 less to contribute to my RRSP (assuming I’ve maxed out all contributions in previous years and will be doing so this year as well)
Mike, no they are mutually exclusive accounts.
=>One important thing to point out is the “capital loss” cannot be claimed in TFSA.
Stocks held outside a tax-free account qualify for lower tax rates on dividends. If you have losses on stocks, you can deduct those losses against previous capital gains if you hold them outside a registered plan, but not if they are in a tax-free savings account.
see details:
http://www.cbc.ca/money/story/2008/12/22/f-langan-tfsa.html
Harvey, that to me looks like an advantage and not a disadvantage. This way you can keep your safe interest bearing assets in your RRSP, your foreign dividend based assets (and interest) in your TFSA (or simply savings accounts for short term savings) and then keep your Canadian Eligible dividends and Capital Gains based assets in regular taxable accounts. The TFSA fully rounds out the option available.
Reponse to CityGirl post Nov 25th:
You can transfer your TFSA account to any other institution keeping in mind that transfer out fees may be charged – each institution’s fees will differ so make sure you ask first. Also, you need to keep in mind the type of investments you hold within your TFSA i.e. if you simply have a TFSA savings account, you can more easily and flexibly transfer your funds to another institution versus having mutual funds and GIC’s for which terms may apply as well as fees, administrative and otherwise, for withdrawing. Because the product is so new, many instiutions have not yet figured out what they will be charging so keep abreast of any fees that may apply after Jan 2nd and throughout 2009.
For more details on the TFSA check out:
http://www.taxfreesavingscanada.ca
I just opened a TFSA saving account in TD Bank, and the representative told me I can deposit $5000 in 2009, but if I withdraw them all in 2009, I cannot deposit $5000 back until 2010. So TFSA in TD cannot be used as short term saving vehicle, not flexible enough.
Harvey, yes . . . keep bashing the plan for what it can’t do.
It’s designed as short term savings for those people who are doing things like buying a house in 5 years, buying a car in 4 years, going on vacation next year or the year after, assisting in income splitting between spouses where one works and one doesn’t. . .
It’s not for your beer money next Friday night.
Harvey,
You can get all the details you need re: the TFSA including it’s benefits for long and sh0rt-term savings from a number of sites. You may not think it’s flexible in the short-run but it’s better than putting your cash under the mattress – at least you are earning interest on your investment – and if you give it two years or more at the maximum investment amount of $5,000, it adds up very quickly. And you can take out the cash whenever you want without paying taxes on it. Short-run doesn’t always mean “tomorrow”.
For more information visit the following:
http://www.budget.gc.ca/2008/pdf/pamphlet-depliant2-eng.pdf
http://www.taxfreesavingscanada.ca
and any of the financial institutions out there.
MY HUSBAND AND I HAVE ALL OUR BANK ACCOUNTS IN JOINT NAMES………..CAN THIS BE DONE WITH TFSA ACCOUNTS……???? WE ARE SENIORS.
Helen: A TFSA closely resembles a RRSP in many respects. Just as you can’t have a joint RRSP, you cannot have a joint TFSA account.
lets say i deposit the 5000$ limit into my TFSA, I then use that 5000$ to invest in a stock via my TFSA. If the stock rises, and i sell – depositing a sum greater then 5000$ into the account, will i be charged the extra 1% tax rate?
Papa luigi: Nope. The penalty applies to contributions made into the account, not to the growth of the account itself. Any return you earn within the TFSA is tax-free.
Can anyone please explain if it is possible to purchase stock that would be kept within the tfsa? Must the stock be purchased from the tfsa account or can stockbe purchased and the maximum of 5000 be directed to the tfsa?
I just came across this discussion site, and thought I would post a few clarifications/corrections to a number of the posts regarding TFSAs.
- TFSAs , just like self-directed RRSPs or non-registered investment accounts, can hold the full range of securities: cash, GICs, stocks, gov’t and corporate bonds, mutual funds,etc.
- Although some intend to use the TFSA as a short-term savings vehicle, I prefer to consider it as a long-term Tax Free “Investment” Account. Why waste this tax-saving opportunity on the 1-3% interest in a savings account or GIC, when you can buy a 6% bond or a stock/mutual fund which will grow (& compound) tax free (but be aware of the short-term volatility of these types of investments). Leave the short-term emergency fund outside if you have the capacity to do both.
- You can buy the investments inside the TFSA, or you can transfer-in existing securities (see list above) currently held in a taxable (i.e. non-registered) account without a problem. However, if at all possible you should aim to do this with ones that have a minimal capital gain/loss because (just like transferring into an RRSP) you are immediately liable for the tax on any capital gain, and you lose the ability to claim the capital loss.
- Reference was made to holding foreign/USA securities inside a TFSA, as they don’t qualify for the dividend tax credit outside. Note however that any dividends will be penalized by the IRS withholding tax – which you can never recover inside a TFSA.
- If you are working and earning a good salary, the RRSP is probably still the first choice for most people for long-term savings. However, if you’ve max’d your contribution, or aren’t earning a salary yet but still have funds, or if you’re beyond RRSP age, then the TFSA is an excellent vehicle.
- Last note: currently in most provinces you cannot designate a beneficiary on TFSAs. Except for a spouse, the funds can only move into another person’s TFSA if they have the unused contribution room.
Like most I was torn about what to do with the TFSA as when something sounds to good to be true…
I transferred a penny stock that I bought for .14 when it had a very bad day and transferred it when it was trading at .10.
Do I get to declared the loss as I never sold just moved it from another account?
Long story short the stock is hit .30 cents and I sold at a tax free profit.
This is a great vehicle for speculative risk investments and I am encouraging all family and friends to put a more risky than safe investment into this new TFSA.
Is it true you can play option in this account? If so that is an excellent play I will do next
I’m considering placing some U.S. stock as well as U.S. Fixed Income assets into my TFSA.
I’m curious if I will still have to pay withholding taxes on the interest and dividends earned from these U.S. assets, even though they are being held in a TFSA?
If I do pay withholding tax, will Canada refund or give a tax break on all the tax paid to the IRS?
Thank you.
Joyce – see previous: You lose the ability to claim the loss.
Calgary – see previous: the IRS tax is withheld (make sure you are classified at the 15% tax level, and not at 30%), and you can’t claim it on your Canadian taxes – it’s lost, so be careful in holding foreign securities
Read in the paper today that you need to open a TFSA in 2009 to start collecting contribution room for future years. Is this correct or will everyone accumulate contribution room from now until their first deposit. IE: should my 18 yr old son start a TFSA now even though he won’t have earnings to contribute for another 3 or 4 years?
Confused: Contribution room accumulates irrespective of whether you have a TFSA account or not. Also, note that TFSA contribution room does not depend on earnings. Every Canadian resident over the age of 18 accumulates $5,000 of new contribution room every year.
What I would like to know is, if you transfer money from a RRIF account to a TFSA, what percentage of tax is deducted from the transaction?
Senior, from what I understand the RRIF withdrawal would be done just like normal and your tax would be calculated just like normal. The TFSA deposit has no bearing on the RRIF.
Income/Withdrawals in the TFSA would then not be taxed.
If I have maxed out my RRSP but have room in my TFSA, what is the down side of putting a dividend paying stock in my TFSA. If it is in a taxable account, even though the tax treatment is favourable, I am still paying tax on the dividends. It won’t be taxed in the TFSA. So what am I missing?
@Jack: Sounds like a good idea to me. If you hold dividend stocks in a taxable account, a TFSA would be a good place to keep it.
@Jack: To add to CC’s comment, make sure they are dividends from canadian companies. TFSA and RESP don’t enjoy the same benefits as RRSP regarding dividends coming from foreign companies and you’ll be charged a withholding tax of 15%.
To CC: The subject of withholding taxes in non-RRSP accounts could be a good topic for a post. Any way to get them back for other registered accounts?
I’m a bit confused. I opened a PC TFSA on Jan. 1st, as did my husband. We invested the full amount for each of us, using money from our regular joint savings account. Recently, we bought a cottage and withdrew the full amount from each of our TFSAs to use as a downpayment. Now, each month, I regularly transfer money into our TFSAs from our regular bank accounts and then transfer some of it back out as we need for other things (cottage renovations, etc.). We are using the TFSAs now as short-term savings accounts. I can’t figure out whether there is a benefit to doing this or whether I should just be sticking to our regular PC joint savings account? Any advice would be most welcome. Thanks!
You cannot use a TFSA to move money in and out. Every year, there is a contribution room. If you max out the contribution room, you have to wait until the next year to contribute to your TFSA again. Otherwise, you’ll be subject to penalties to the tune of 1% per month of the over contribution.
http://www.canadiancapitalist.com/faqs-on-tax-free-savings-accounts/
If I purchase US stocks in my TFSA, what taxes do I have to pay to the IRS – tax on dividends, interest income and capital gains or just tax on dividends?
Georgi: The withholding taxes are the same for a TFSA account and a taxable account. In a taxable account, holding a US stock that pays a dividend will attract a withholding tax. Same for a TFSA. There is no withholding tax on capital gains. Same for a TFSA. I’m not sure about interest; I’ve never held US bonds.
I opened a TFSA at the start of this year, but I have a question – at the end of this year, if needed, can I transfer money from my TFSA into my RRSP?
@ Young Investor in Training
yes you can transfer from TFSA to your RRSP, however if you have had any Capital Losses you will not be able to claim those.
[...] Canadian Capitalist Ideas for your TFSA [...]
Does anyone know about the tax rules for leaving your TFSA to a beneficiary or to your estate?
If I take out 2K from my TFSA in ‘09 and in ‘10 go to put it back in what gets paid first my ‘10 contribution or my ‘09 pay back?? How is the government going to track this or inform us?
Rocque4: It all gets bundled together. If you put 2000 in in 2009 meaning you have 3000 of contribution room available, you remove that 2000 in 2009 leaving the 3000.
Jan 1st 2010 comes around, you get any withdrawals plus your new room added to your room available, in your case 2000 + 5000 (7000) plus your 3k from the previous year making 10000 of room available for use in 2010.
Question for anyone.
Lets say you contributed $5000 on the first month of your TFSA.
You have no more room to contribute and so you let it sit collecting interest.
By the end of the year you collected $50(generalize) in interest.
Now you have $5050. Does that extra $50 effect your contribution room the next year. Meaning you can only contribute $4950 the next year.
Don’t want to over contribute and get penalized for not knowing that the interest collected will effect my contribution limit.
Also say that something happens the 4th quarter of the year and you had to withdraw everything from the TFSA. At the time of withdraw you collected $5040. Will you be able to recontribute $5040 + $5000 the the coming yr?
Any info would be of help.
Thanks!
@Cez: (1) Any growth *within* a TFSA does not affect contribution room assuming no withdrawals are made. In your example, next year’s contribution room is $5,000.
(2) Yes. Your contribution room for next year is $5,040 + $5,000 = $10,040.
@Canadian Capitalist
Thank you!
I want to open up a TFSA account and put in $5000 cash.
I would then like to spend my $5000 to purchase 5000 option warrants that I own in my trading account, these warrants are exersisiable at .90 cents a share, allowing me to by the stock at anytime for 2 years of a canadian company.
Once this has been done can I then sell the stock at the market price tax free?
I would then like to sell the stock befor year end, as the stock trades over $7.00 per share.
Is this possible to do?
Open account and deposit $5000.00
Use account to buy non trading warrants for .90 cents per share = $4,500.00.
Sell shares on the stock market for $35,000.00
I have had two opinions already one yes, he says I am paying the full price required .90 cents?
The no says that I would have to take the price of what the stock trades at on the day that I exersise the warants and use that as my purchase price not the .90 cents?
where can I go to get a final YES or NO?
Alfee55:
The option strike price is not the same as the value of the option. When you attempt to move an option, a value will be assigned to it. That value will be the difference between the strike price and the underlying stock price.
In your case $7 per share, $0.90 strike price meanse that each option is currently worth $6.10. You’ll be allowed to move about 819 of your options which will have a total value of just under $5000. At that time there will also be a deemed dispostion and you’ll have to pay tax on the gain you have made to this point.
So in otherwords, no you cannot use the TFSA to screw the government out of their tax money, even though we’d all like to.
i’ve recently purchased some shares in a co. that hasn’t yet gone public. i’m hoping to transfer the shares into my TFSA…?? hopefully before the co. goes public with an expected increase in the value of the shares. is there anyway i can do this without waiting for the co. to go public registering the cert and then purchasing the stock at the current price through the TFSA account?? or is this the easiest only way to do this…..???
thanks…great site.
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