Comments on: Reader Question on In-Kind RRSP Contribution

By: Mike

Mike — Tue, 09 Nov 2010 03:44:53 +0000

Hi,

You state above in the original article that “When you have a capital loss, it is better to sell the stock in your investment account and purchase it immediately in your RRSP account.”. Given the 30 day rule to avoid a superficial loss I think you have a typo there.

By: In-Kind Contributions and Superficial Loss Rules

In-Kind Contributions and Superficial Loss Rules — Tue, 24 Feb 2009 12:39:19 +0000

[...] If you hold securities in a taxable portfolio, you can contribute them in-kind to your RRSP. But, you have to keep in mind the tax implications because an in-kind transfer is considered as a deemed disposition. If you have capital gains, you’ll have to declare it in your tax return. However, you cannot claim a capital loss on an in-kind contribution. [...]

By: shannon

shannon — Sat, 25 Oct 2008 20:05:13 +0000

Hi i have no capital gains in the last 3 years. I recently sold 11700 units at 0.01$ which is 117.00 gain, but it cost me 28.95 american (I live in Canada) . Those 11700 units cost me on average .519$ which is $6072.3. How much of this 6072.3 plus 28.95 subract 117.00 can i claim as a capital loss on my tax return. I use genutax program.
thanks
shannon

By: Canadian Capitalist

Canadian Capitalist — Thu, 22 Nov 2007 22:53:59 +0000

Charlie: Your RRSP is considered to be arms length, so an immediate purchase of the same security within your RRSP isn’t considered a “superficial loss”.

I’ve had my RRSPs with RBC Direct and TD Waterhouse. I’ve contributed in-kind to both. There are no fees involved.

By: Charlie

Charlie — Thu, 22 Nov 2007 19:19:30 +0000

Interesting… so it seems to be okay to do this if you plan on repurchasing the stock in your RRSP but not if it’s in the non-registered. Btw, which brokerage are you with that allows contribution in-kinds? It seems that Questrade does not have this option.

By: Canadian Capitalist

Canadian Capitalist — Tue, 20 Nov 2007 23:06:54 +0000

Charlie: No, you can’t. That’s called a “superficial loss” and CRA will disallow your capital loss claim. You’ll have to wait 30 days before buying back the same stock to be eligible to claim a capital loss. I’m sorry for using the term “wash sale”, which is a US term for “superficial loss”. You’ll find a complete explanation here:

Link

By: Charlie

Charlie — Tue, 20 Nov 2007 22:42:45 +0000

Canadian Capitalist,

Regarding your advice on dealing with the capital loss, can one claim a capital loss on a non-registered investment under the following scenario?

Buy stock at 50, it drops below 40, you sell it and claim a loss, then immediately buy it back with the hope that it will go back above 50 in the following year?

Thanks,
Charlie

By: Canadian Capitalist

Canadian Capitalist — Mon, 19 Nov 2007 20:31:27 +0000

Charlie had a follow-on question on capital losses:

Is this [the warning on contributing a stock with a capital loss to a RRSP] much of an issue if you plan to hold it for the long term and only sell it once it reaches a profit? Or is your point, that even despite this you can do even better by selling it in your non-registered account, claim the capital loss, and then buy it right away in your RRSP?

My response:

If you buy a stock in your investment account and contribute in-kind right away, usually you won’t have much of a capital gain / loss.

But, consider the case where you purchased XYZ at $75 (exchange rate is same). Now, you have a capital loss of $3325. If you contribute in-kind, you cannot claim this as a capital loss. But if you do sell the stock in the investment account and buy it in the RRSP, you can claim a capital loss. You can use the loss to offset capital gains in the past three years or the current year. If you still have a loss, you can carry it forward indefinitely.