Should I Transfer Insurance Company shares to my

Question: Late last year we were fortunate to receive stocks through our insurance company’s demutualization. In talking to our accountant, he said that in our situation we should not be into stocks, regardless whether it was a windfall or not, that the stocks should be converted over to an RRSP. The problem is HOW do we convert them without increasing tax payable? Can the value of the stocks be totally converted into an RRSP without increasing our income levels and hence tax payable?

Gordon Pape answer: If you contribute the shares to an RRSP, you will be considered to have sold them for tax purposes. Since shares received from the demutualization of insurance companies are deemed to have a zero cost base by Revenue Canada, this means you would be taxable on the full market value of the shares when they go into the RRSP (it wouldn’t matter whether it was your plan or your spouse’s). Based on what you have told us, it appears there is no advantage to putting them into an RRSP, and in fact there would be a significant tax disadvantage in doing so because you would pay tax on the shares going in and again on the proceeds when they come out of e plan. This is something your accountant should be aware of, so we recommend that you discuss the matter with him again in the light of this information.