Should I move shares to my TFSA and RRSP?
Q – I have a good dividend paying stock and would like to move part of it into a TFSA where I have accumulated a few years of contribution room and the remainder into my self-directed RRSP, to which I haven't contributed for years. If my intention is to reinvest the money back into the same company, but under both the TFSA and the RRSP umbrellas, am I making a sensible move or should I leave things as they are? I'm 60 years old and drawing a pension. My spouse won't retire for another five years and we manage well with our combined incomes for now. – Monica D.
A – For starters, you don't have to sell the stock to make the transfers. You can contribute it in kind, assuming you have self-directed plans.
If you move the stock into either plan, it will be deemed a taxable event by the Canada Revenue Agency and you will be taxed on any capital gain. The same will apply if you sell the shares. You should take that into account before you act.
If you decide to proceed, your dividends and capital gains will be fully sheltered in the TFSA. The RRSP will give you a tax deduction when you contribute but you'll be taxed at your marginal rate when you make any withdrawals, including on the original contribution. – G.P.
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