Q&A: TFSA Rules

This image is no longer available

A reader wants to know: What happens when you sell an asset and then buy it back?


Q – My question deals with TFSA accounts. As I understand the rule concerning selling an asset in a TFSA and replacing that asset (for example, a common stock) in the following year applies only if the account does not have contribution room. However, if there is lots of contribution room in the account, can one buy back that security in the same year without incurring a penalty? Does the 30-day rule (i.e. active or day trading) apply to that same account? – Roy M.

A – Your question indicates you are referring to activity within the account, i.e. selling a stock and retaining the cash in the TFSA. In this case, you are free to do whatever you want with the money, including repurchasing the shares that were sold at any time. The 30-day rule does not apply because all the transactions occur in a tax-sheltered environment.

If you withdrew the money from the TFSA after selling the stock, then the contribution limit would come into play if you were to re-deposit the cash within the same year in order to buy back the stock. – G.P.

Do you have a money question you’d like to ask Gordon? Find out how to submit it here and then check out our Money section regularly to see if it was chosen for a response. Sorry, we cannot send personal answers.