A question asked too late

Q – Here’s the situation. I transferred a stock from my investment account to my registered account (RRSP). I originally bought the stock within my investment account at a higher value ($13) than when I transferred it ($9) to the registered account. I would now like to bring the stock back to my investment account. Can I now swap cash (or other security) in exchange for this stock so that I can sell it within my investment account and take advantage of the capital loss for tax purposes? – D.R.

A – Too bad you didn’t send in this question before you made the move. Now it’s too late.

When you transferred the shares into the RRSP, it was considered to be a sale by Canada Customs and Revenue (CCRA). If they had gone up in value, you would have been on the hook for tax at the capital gains rate on the profit. But, and here’s the stinger, CCRA will not allow a capital loss claim in this situation. Unfair, perhaps, but that is the rule.

If you now bring the stock back out of the RRSP through a swap, it will go into your non-registered account at its market value on the day the swap is made. Any future capital gain/loss will be calculated on the bas.

Moral of the story: never transfer a money-losing security to a self-directed RRSP. Sell it and crystallize the loss for tax purposes. Then contribute the cash. – G.P.