Dale Jackson

Personal Finance Columnist, Payback Time

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ANALYSIS: No one can deny the tax advantages of investing in a registered retirement savings plan or tax-free savings account. But if you want to move investments under those tax shelters, be prepared for a tax storm.

Transferring investments from a non-registered account to an RRSP or TFSA is considered an “in-kind” transfer and has tax implications. It’s like parking your car and finding a cheaper or free spot. Before you move your car you must settle up with the original parking attendant – in this case it’s the Canada Revenue Agency.

It starts with a 50 per cent capital gains tax based on the value of the security at the time of transfer. Taxes must also be paid on dividends or income generated up to that point.

There is, however, a snag if an equity investment has gone down in value and you want to use that capital loss to offset past or future capital gains. In the case of in-kind transfers to RRSPs and TFSAs, capital losses are not deductible…but there is a way around that.

Shares in a non-registered account that have declined in value can be used to offset capital gains if they are sold, and the cash can be contributed to an RRSP or TFSA.

If you or your spouse wish to repurchase the same shares in the RRSP or TFSA, you must wait at least 30 days. Otherwise the loss will be considered a “superficial loss” and will be disallowed.