If I take out the entire amount of $72,000 from my tax-free savings account to lend to my son temporarily, can I replace that amount into my TSFA in the next calendar year when he repays me? Or am I only entitled to recontribute the current maximum of $69,500?
The $69,500 figure you refer to is the cumulative total of annual TFSA contribution limits from 2009 – when the TFSA was introduced – through 2020. For 2021, the annual dollar limit is $6,000 (the same as 2019 and 2020). Therefore, an individual who qualified for the TFSA every year since 2009 but has not yet made a contribution would have $75,500 of available TFSA room as of Jan. 1
In your case, it sounds like you have contributed the maximum each year and have no additional TFSA contribution room.
The good news is that, when you make a TFSA withdrawal, the entire amount is added back to your contribution room on Jan. 1 of the following year. So, if you were to withdraw $72,000 from your TFSA in 2020 to lend to your son, you will get $72,000 of TFSA contribution room restored as of Jan. 1 – plus $6,000 of room for 2021, for a total of $78,000. The amount added to your contribution room from withdrawals in the previous year is not limited by the sum of the annual dollar limits.
Bottom line: Make sure to do the withdrawal in 2020. If you wait until 2021 you won’t get the additional contribution room until Jan. 1 of 2022.
I read about Choice Properties Real Estate Investment Trust’s (CHP.UN) special distribution of 9 cents per unit which will take place on Dec. 31. I understand that this is a non-cash distribution that will be paid with the issuance of additional trust units. What I do not understand is the following statement from CHP.UN about these additional units: “Immediately after the payment of the special distribution, the issued and outstanding trust units will be consolidated such that the aggregate number of issued and outstanding trust units will be the same as immediately before the special distribution.” What does that mean?
I hate to break it to you, but you’re not getting anything from this distribution – except a tax liability.
In its press release, Choice Properties REIT indicated that the special distribution reflects capital gains realized by CHP.UN during the year. Choice isn’t sending investors any cash, however; it is simply doing a paper transaction that will make the gains taxable in the hands of investors.
By issuing additional units, Choice creates a taxable event for unitholders. But because the number of outstanding units will be immediately adjusted back to the original total, unitholders will own exactly the same number of units, trading at the same price, as before the special distribution. The only difference is that investors will now have to pay tax on the gain.
Choice’s special distribution is similar to the reinvested or “phantom” distributions that many exchange-traded funds announce at this time of year. As with reinvested distributions from ETFs, the special distribution from Choice should be added to the adjusted cost base, or ACB, of your CHP.UN units. (This assumes you hold the units in a non-registered account; if you hold CHP.UN in a registered account, you will not pay tax on the special distribution and your adjusted cost base is irrelevant.) Failing to increase your ACB will cause you to pay more tax than necessary when you eventually sell your CHP.UN units.
I understand that if I sell a stock for a capital loss, I must wait 30 full calendar days to repurchase the same stock in order to be able to claim the loss for tax purposes. However, for the life of me I can’t find an answer to the following question: Do I have to wait 30 days to repurchase a stock if I sell that stock to take a profit?
No. When you sell a stock for a capital gain in a non-registered account, the gain is taxable in the current year. This is true whether you repurchase the stock or not, and the timing of any repurchase is also irrelevant. The 30-day waiting period is only relevant when you sell a stock for a capital loss, because the Canada Revenue Agency doesn’t want people to sell and immediately repurchase a stock simply to trigger a loss for tax purposes.
E-mail your questions to jheinzl@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.
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John Heinzl