Q&A: A worried man

Question: I heard the government will crack down on TFSAs abusers. I transferred $5,000 into my TFSA account and used it to buy INN.UN (Innvest REIT). Am I doing anything illegal? Are we allowed to buy stocks in a TFSA? What is allowed and what is not? – T.V.

Gordon Pape answers: Relax. You’ve done absolutely nothing wrong. Stocks are permitted in all registered plans, including TFSAs, as long as they trade on what the Canada Revenue Agency refers to as a “prescribed exchange”. The Toronto Stock Exchange, where Innvest trades, certainly qualifies. For complete details on qualified investments, check the CRA interpretation bulletin IT-320R3 which can be found here.

Of course, you must have a self-directed TFSA set up through a broker to buy stocks. A bank TFSA won’t offer that option.

Do you have a money question you’d like to ask Gordon Pape? Please visit this page to find out how. Then check our website every week to see if it was chosen for a response. Sorry, we cannot send personal answers.

Photo ©iStockphoto.com/ Eduardo Jose Bernardino