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investor clinic

To take advantage of lower stock prices that may occur because of the tax-loss selling season, I would like to purchase a stock in my tax-free savings account on Dec. 30 or Dec. 31. Then, on Jan. 1, I would make my annual TFSA contribution of $6,000 to pay for the trade in time for the settlement date, two business days after the purchase. Is this possible?

I doubt your broker will let you buy a stock before there is sufficient cash in your TFSA. But there’s an easy workaround: Purchase the stock in your non-registered account now. Then, after Jan. 1, call your broker and contribute the stock in-kind to your TFSA. The fair market value of the shares at the time of the transfer will be your TFSA contribution. Be aware, however, that if you buy $6,000 worth of shares they could appreciate and exceed your TFSA limit by the time you transfer them. So consider buying less than $6,000 of stock. Alternatively, you could create additional TFSA contribution room for 2021 by withdrawing some cash from your TFSA in December. The value of the withdrawal will be added to your contribution room as of Jan. 1. So, for example, if you withdraw $500 in cash now, you will be able to make an in-kind contribution of up to $6,500 in shares as of Jan. 1. (This assumes you have maxed out your TFSA contributions in previous years and have no additional TFSA room.)

I will be contributing $6,000 to my TFSA in early January. If I borrow to make my contribution, is the interest on the loan tax-deductible? If not, should I purchase $6,000 worth of stock in my non-registered account, using my line of credit, then transfer the stock in kind into my TFSA?

If you borrow money to invest in a TFSA or other registered account, the interest is not tax-deductible. If you borrow to invest in a non-registered account, the interest is deductible (as long as the investment generates income or there is a reasonable expectation that it will do so in the future). However, interest would cease to be deductible once you transfer the shares to your TFSA.

How does one calculate the adjusted cost base for a stock purchased through an employee biweekly purchase program and dividend reinvestment plan over an extended period of time? The program includes several stock splits over the course of my participation in the plan.

Calculating your ACB may not be as onerous as you think. First, determine the total dollar amount that you have invested. Don’t worry about stock splits or calculating the precise number of shares you acquired with every biweekly purchase or quarterly dividend reinvestment; just add up how much money you have spent in total. Second, determine how many shares you own now. Third, divide the total dollar value of your purchases by the number of shares you currently own. This is your ACB per share. Remember that your ACB per share will change slightly every time you make a purchase, so you will need to update your ACB to calculate your capital gain when you plan to sell shares. If you don’t have a record of your purchases, your program administrator may be able to provide them. (For more on calculating your ACB, including what happens when you sell only a portion of your shares, read my column here.)

Do the Canada Revenue Agency’s superficial loss rules, which you discussed in a recent column, apply to transactions in my tax-free savings account? I might want to sell a stock, even at a loss, in my TFSA because I’m sure I can repurchase the same stock a day or two later at a lower price.

Losses inside a TFSA (or any registered account) cannot be used to offset capital gains in a non-registered account. So, no, the superficial loss rules don’t apply to TFSAs. The CRA doesn’t care if you sell a stock in your TFSA and buy it back a few days later, a few weeks later or a few months later. You can’t use the loss under any circumstances.

I have some shares in my cash (non-registered) account with a loss I would like to trigger. Several weeks ago I purchased additional shares of this company in my TFSA and plan to sell the shares in my cash account after the 30 days have passed to trigger the loss. Is this an acceptable approach?

Yes. As long as you do not purchase the same shares within the 30 calendar days before or 30 calendar days after the sale (based on the settlement dates for each transaction), you do not have a superficial loss and you can claim the loss for tax purposes. Remember that to do this, the last trade date for settlement in 2020 is Dec. 29.

Special to The Globe and Mail

E-mail your questions to I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.

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