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Dear Nancy Woods

I want to make a contribution into my RSP using stocks I already own. I know it is better to own U.S. stocks in an RSP because of the non-residency withholding tax. I do own a U.S. stock in my investment account I want to contribute. How do I know how much my contribution is since it trades in U.S. dollars?

Signed John

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Dear John,

You are correct that it is better to hold the shares of a U.S. based company in a registered plan. If that company pays a dividend and is held in a registered plan that is meant for retirement purposes there isn't a non-residence withholding tax deducted. It has to be an account meant for retirement so the TFSA does not qualify.

The valuation and logistics of making the "in kind" contribution can vary from institution to institution. The way I know it to work is that the shares are transferred from a U.S. dollar denominated account into an RSP that is U.S. dollar denominated. The contributor will receive a contribution tax slip for the equivalent Canadian dollar amount. If there is a capital gain on the stock before the contribution and/or as a result of the foreign exchange it must be declared as a capital gain. If there is a capital loss it cannot be declared.

If you make the contribution now in the first 60 days of the new calendar year, you have the choice as to which tax year you deduct it from your income. Note that you don't have to deduct the total amount either. I rather that my clients don't wait until the following year to make their RSP contribution but that they do it as soon as they get their income tax assessment. It will show the maximum allowance for the current year.

The sooner you can make your contribution the sooner you can gain the extra time of tax sheltering. Avoid being a procrastinator.

I hope this information helps.

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Nancy

Nancy Woods is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. Visit her website www.nancywoods.com or send an email request to asknancy@rbc.com. You can also send your questions to asknancy@rbc.com.

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