Principal Issues: Can a taxpayer swap property between the taxpayer's TFSA and RRSP?
Position: No.
Reasons: Department of Finance News Release dated October 16, 2009.
XXXXXXXXXX 2009-030745 G. Allen October 29, 2009
Dear XXXXXXXXXX :
Re: Tax-Free Savings Account (TFSA) - Swaps
This letter is in reply to your email sent January 22, 2009, wherein you enquired whether an individual can swap securities between the individual's TFSA and registered retirement savings plan (RRSP).
Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Ruling", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office, a list of which is available on the "Contact Us" page of the CRA website.
On October 16, 2009 in a Finance Canada News Release, available at: http://www.fin.gc.ca/n08/09-099-eng.asp, proposed amendments to the Income Tax Act were announced to address concerns that have arisen regarding the use of TFSAs in tax-planning schemes. One of the proposed amendments is to prohibit asset transfer transactions (swaps) between TFSAs and other registered, e.g., RRSPs, and non-registered accounts. This prohibition would apply to transfers effected between accounts of the same taxpayer or that of the taxpayer and an individual with whom the taxpayer does not deal at arm's length. It is proposed that this measure apply to transactions occurring after the date of the news release. With respect to swap transactions involving TFSAs that may have occurred prior to October 17, 2009, the CRA will be examining any unusual TFSA transactions and applying the existing TFSA rules to challenge aggressive tax planning where appropriate.
We trust that our comments will be of assistance to you.
Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch