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I wish to move securities (stocks) in kind from one account of an online brokerage into a registered tax-free savings account (TFSA) at the same brokerage.

How should this contribution to the TFSA be converted to an equivalent in CAD, for filling in the tax return? Do precise exchange rates need to be recorded?

Specifics:

The securities to transfer are held in a USD account (from account), and the transfer is in kind (preferably).

  • Source Account : non-registered account (USD)
  • Destination Account: registered TFSA account (USD)
  • Security type: US Stock units
  • Transfer type: In Kind.

(in case it helps, the transaction will be done within QTrade.)

Related:

  • This question is related to this one, Transferring USD into a TFSA , but there's neither cross brokerage transfer involved, nor cross-border transfers, and here we're moving securities, not cash.
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  • Does Q-Trade provide you with TFSA statements annually indicating contributions? I presume they should do so. The burden of converting correctly is on them, and barring serious error I suggest to just accept the numbers they provide you. Aug 9 at 14:56
  • QTrade does provide what they call a Trading Disposition Summary (TDS) every year on Feb 28, but apparently that can be inaccurate (citation needed). But in any case, that's after you've had to determine how much to contribute (to stay under the limit), so it is only useful in retrospective, and not so much to avoid overcontributing. Asking their support is one option...
    – pf_init_js
    Aug 10 at 5:52
  • They will be reporting to CRA the same numbers they report to you - so if it's innaccurate, you will need to be prepared to convince CRA when your filings disagree with their expectations. Understood about needing the numbers in advance to avoid overcontribution in the current year; agreed that calling their support to see if they have a monthly statement available would likely be the best bet. Aug 10 at 13:02
  • Case in point, I've transferred some shares over from a fidelity stock plan into QTrade, and the initial average cost of the shares in the account is shown as $0.00. I have to go to my account's portfolio view and update the BV field myself (which I learned stands for "book value"), and set the value that matches my books. Once it's set correctly, I'm sure qtrade will roll it forward correctly. Maybe other brokerages keep track of additional metadata when they transfer in? :shrug:
    – pf_init_js
    Aug 13 at 7:02

1 Answer 1

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Found this article which offers an explanation of what happens:

In-Kind Transfers of Securities Income Tax Act s. 39(1)(a), 248(1)

Securities are transferred from a non-registered investment account into a registered retirement savings plan (RRSP), registered disability savings account (RDSP), tax-free savings account (TFSA), or registered retirement income fund (RRIF).

In this case, the deemed proceeds will be the market value of the securities at the time of transfer to the registered account. Note that if a loss has occurred in the transfer to an RRSP, RDSP, TFSA or RRIF, it will not be deductible for tax purposes. See our article Transfer shares to a registered account, but not at a loss.

Source: https://www.taxtips.ca/glossary/deemed-disposition.htm

You would update the ACB of the in the remaining shares (the non-transferred ones) as if you'd made a sale in a foreign currency:

When calculating the capital gain or loss on the sale of capital property that was made in a foreign currency:

  1. convert the proceeds of disposition to Canadian dollars using the exchange rate in effect at the time of the sale
  2. convert the adjusted cost base of the property to Canadian dollars using the exchange rate in effect at the time the property was acquired
  3. convert the outlays and expenses to Canadian dollars using the exchange rate in effect at the time they were incurred

Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html#P317_34283

You will have to call in your brokerage and send them transfer instructions. They should be able to quote you a fair market value per unit, a transaction fee, and an exchange rate. (the transfer will likely be done later, but at the value you got quoted)

You then update your TFSA contribution limit based on the canadian dollar amount of the transaction. If it is not quoted to you by the brokerage when you call in the transfer, the CRA provides some guidance to establish a conversion:

The foreign exchange rate used to convert the foreign currency transaction into Canadian dollars is either

  • the rate in effect on the date of the transaction, or
  • the average annual exchange rate for the taxation year as quoted by the Bank of Canada on the particular day or on the closest preceding day for which a spot rate is quoted, as per the definition of "relevant spot rate" in s. 261(1) of the Income Tax Act.

When assets, including investments, are purchased or sold, the exchange rate in effect on the date of the transaction should be used. Dividends received throughout the year can be converted at either the transaction date rate or the average annual exchange rate for the taxation year, but the method used should be consistent from year to year. _Source: https://www.taxtips.ca/filing/reporting-foreign-transactions.htm#:~:text=Converting%20Foreign%20Amounts%20to%20Canadian%20Dollars _

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