Investment Q&A

Q: Hi Peter, Ryan and Team,

I have a question about TFSA accounts. Are the maximum limits to the TFSA cumulative? For illustration purposes, say if the limit were $5,000 per year for 5 year period, the maximum to contribute is $25,000. But if during that 5 year period, I only contributed $10,000, am I able to make up the $15,000 difference in year 6?

Throughout year 6, would I be able to contribute $20,000 ($15,000+$5000) and does it have to be one lumpsum? I am a bit confused, because every time I make a contribution to the TFSA, the bank has a statement that warns about overcontributing for the year.

Thanks.

Q: I often see people make the following comment on your site, saying to the effect that they cannot realize a loss on a stock because it’s in their RSP/RIF. They really can, and usually to a much greater benefit than in a non-registered account. It’s how you look at the issue.

Withdrawals from RSP/RIF are taxed at your marginal tax rate. The taxman is sharing in your loss, should you decide to sell, they’re just not sharing in the same tax year when you sell. Their ‘sharing’ comes when you withdraw funds.

To give an example of this:

At a $50,000 income level, the combined Provincial (Ontario in this case, but all are similar) and Federal income tax rate is 30%, and the capital gains tax rate is 15%. If you took a $20,000 loss in an RSP/RIF, upon eventual withdrawal, you’ll be paying $6,000 less in tax (because you won’t be withdrawing what isn’t there - because you would have sold already). Had the sale been in a non-registered account - and you suffered the same $20,000 loss - you would only be saving $3,000 in taxes, because the capital gain rate at $50,000 income is only 15%.

At $93,000 income, tax rate is 38%, and capital gains tax is 19%. Using the same example, a $20,000 loss would mean that, upon withdrawal, $7,600 less will be paid in tax versus had the loss been realized in a non-registered account, the capital gains tax saved would only have been $3,800. The higher the income, the more this scenario plays out to the individual’s advantage.

It’s a different way of thinking about it, and I realize that one doesn’t want to see a loss in a registered account because the funds cannot be replaced, but putting that aside, the taxman most definitely shares in your loss in an RSP/RIF, to an even larger extent than they do with capital gains. it’s just that you can’t ‘see’ it, you have to think about it. But it is the long game.

At any rate, just another idea, and please publish if you feel it is worthwhile for your subscribers.

Q: Hello 5i, Currently managing a cash/dividend investment account for 90 year old mother. Dividends and capital gains from this account are used to supplement OAS, CPP and RIF income. Also trying to manage overall personal income for her so as not to exceed OAS clawback net income of $79,054 for 2020. Question - can I use a net capital loss in the year against taxable capital gains to ensure I stay below the 2020 clawback amount ? Many thanks, Steve

Q: Hi 5iTeam,
My question is on withholding tax on US equities/etfs. If I purchase dividend-paying US equities in a non-registered account, there will be tax withheld which I can use at tax time as foreign tax credit to reduce my Canadian tax. What if I purchase a dividend-paying US etf, how would withholding tax come into play in this scenario?
Also there is no withholding tax on dividend-paying US equities if they are purchased for a registered account. Would US withholding tax apply if a dividend-paying US etf is purchased for a registered account?
Cheers,

Q: In response to a recent question on BIP.UN, you mentioned it is best in a RRSP or non-registered rather than a TFSA. Is that the same with BAM.A:CA and BRF.PR.E:CA as well? Is the RRSP the best account tax wise? I understand this is true for all US Dividend paying stocks and US Reits, but is it also the same for any TSX listed stocks that make income outside of Canada? Then for TFSA accounts, are they best for Canadian and US growth Stocks, and Canadian Reits?
Thank you!

Q: I am about to become a Canadian non-resident for tax purposes. (once borders reopen). I understand I can keep my TFSA in Canada with no tax issues, but cannot contribute anything more to the TFSA. Does that make sense to you? If so, would ZGQ be a good all purpose ETF to leave in my TFSA. Any issues with this etf being in a TFSA? Any other ideas? Thanks.

Q: Dear 5i,

I wish to purchase the following US listed ETF's;
VGT, VIG, ARKK, ARKW

Can they be held in a TFSA and NonReg account?
Is there a rule of thumb one can use to determine the eligibility of other US listed ETF's?
Who will provide me with the year-end tax statement for the NonReg account? Is it the online broker or the ETF provider? In this case TD Direct Investing or Vanguard and Ark?

thanks

Q: Not a question. Just to let your client know that have been claiming the subscription fee on my income tax for pass three years. Claim under investment advice. No problem. As long as it aids you in making decisions on your investments.
Another example subscription to G&M.
Thank you Peter and your team for your excellent unbiased advice.

Q: My Virtual Brokers account still shows shares of Guestlogix (gxi:ca) and Newnote Financial (neu:ca). Both companies went out of business several years ago. Can I get anything for these, ie some bankrupsy settlement? Should they be removed and junked, or is there any benefit to do nothing and wait?

Q: greetings.
It would seem that CRA is getting a bit more aggressive on their review of Capital gains and losses based on my last audit. Although i did everything correctly according to the rules they still tried to push their view of superficial losses. Just wanted to clarify as l try to lock in some losses for this year, if i sell my bank stocks and buy an ETF covering the banks within the 30 days, i can claim these as losses?

Q: Good morning, quick question. If I sell a bank share (say CIBC) at a loss and immediately buy a different bank share (say RBC) does the loss stand for CRA purposes? Do I have to buy outside the financial category if I want to ensure my capital loss from CI stands? Is this clear with CRA or am I best to wait thirty days before buying another financial? Thanks

Q: I am working on setting up an RESP for my Granddaughter. We have about 10 years to grow the RESP before changing it to a more conservative approach. Looking for 3 to 5 solid Canadian ETF's - one of them being the best to track the S&P 500. What 3 to 5 ETF's would you recommend for growth and diversity? I would like to keep dividends in Canadian dollars to avoid withholding taxes. Thank you, Patrick

Q: If I sell BIP,UN at a loss and buy BIPC would the loss be considered a superficial loss by CRA.
Thank you.

Q: Dear Peter and Ryan.

Thank for your great work. I have a full time job and receive T4. I am filing income taxes for some capital gain last year. I am wondering whether I can claim the membership subscription here as an expense to offset the capital gain. Where to fill the number if yes?

Thanks again,
Yiwen

Q: I intend to buy DIR.UN, IIP.UN and CAR.UN. I do not need the income, I would buy them because you have recommended them in the past and I need some diversification into the real estate sector. My question is, given that their distributions can be R of C, foreign income, and other income, are they best purchased in a TFSA or RRSP, rather than in a non-registered account?

Q: I have just opened a corporate non registered account. I have a fair bit of cash sitting there doing nothing. I do not plan on needing any for many years but in case of an emergency I do want access (as apposed to buying real estate and have to sell in a short time frame). From my research it seems best to invest into Canadian stocks/etfs as apposed to foreign which I also assume the US? Am I on the right track? I understand you are not accountants and certainly do not emulate to be. I also have a call into my accountant.

Q: Received some BIPC shares from my holding in BIP.un. At the beginning both were equivalent in $ but now the spread is between $3 and $4. Although both are in my TSFA, should a consolidated all in BIPC before the spread get bigger?

Q: The CRA just charged me 50% of the value of my SDX shares (which aren’t really worth that much )because they apparently aren’t on the TSX anymore and I hold them in an RRSP.
Please tell me that the same thing isn’t going to happen with the TSGI shares when the deal goes through with Flutter.
Thanks
Randy

Q: Can a stock be transferred in kind from RRSP to TFSA?

Thanks for the great service
Kevin

Q: Hello,
What are the pros or cons to holding US dividend payers (ETF's or Equities) in an RESP? Wondering about withholding tax issues on the dividends?
Thanks, Patrick