Q&A With Gordon Pape: Minimizing Taxes
The bank is giving this reader problems moving shares into a TFSA. What should he do to reduce taxes on any profits?
Q – I hold some Bank of Nova Scotia shares in a Dividend Reinvestment Plan (DRIP). The administrator of this account does not allow for these to be transferred into a TFSA. What’s the best way to draw down on these to minimize tax implications? This pays a neat dividend. – N. D.
A – I assume you can’t transfer the shares to your TFSA because it is not a self-directed plan. If it were, you could move them as a contribution in kind, although you would have to pay tax on any capital gains to that point.
Holding the shares in a non-registered account enables you to take advantage of the dividend tax credit plus only 50 per cent of your capital gains are taxed. If that is not enough of a tax break for you, set up a self-directed TFSA and transfer the assets from the current plan to it (the administrator can handle that). Then sell the BNS shares (again paying tax on the capital gain to that point) and buy them back inside the new TFSA. – G.P.