TD Direct Investing (was Waterhouse) Service

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pmj
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Re: TD Direct Investing (was Waterhouse) Service

Postby pmj » 06 Jan 2017 12:23

We make an RRSP - TFSA transfer at TDDI every year. You can certainly select the price at any time in the evening, and probably up to market open the next day.
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Re: TD Direct Investing (was Waterhouse) Service

Postby Hammerer » 06 Jan 2017 18:10

I understand the opportunities are limited. I was mostly surprised I got to choose a price. I waited until after close because I wanted to be prepared and know exactly how many units to transfer to get as close to $5500 as possible, and I could do that with the fixed close price, but to my surprise, I could pick any intra-day price.

I suppose for those with a diversified cash portfolio, there could be more opportunities. It's usually going to be a tiny benefit, but I like to optimize everything.

Sadly, my VCN is close to its ACB... maybe even closer once I factor in any ROC.

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Re: TD Direct Investing (was Waterhouse) Service

Postby adrian2 » 06 Jan 2017 22:46

cardhu wrote:Hammerer is referring to a single-day jump in price … when doing a transfer-in-kind, you can select the transfer price from among the day’s trading range … so if a stock shoots up 10% in a day, as occasionally happens, you can transfer in, select the low for the day as the transfer price, and shield that 10% gain from tax … obviously, gains accrued prior to that day would not enjoy this sheltering.

Hammerer … the intentional triggering of some gains to shelter other gains, may or may not be worth it in the end … if the stock in question is already 70% ahead of your ACB, and you transfer in on a day that it leaps in price, the negative effect of the tax drag may outweigh the positive effect of the sheltering. There could be opportunities, as you say, but every situation would have to be evaluated on its own merits, and would have to be evaluated FAST, before the market closes. The best case scenario would be where the stock in question is trading only slightly above your ACB on the day that the market causes it to spike. You would also have to have TFSA capacity standing by, ready to be used in this manner. All in all, I think the opportunity for substantial benefit would be rare. But it does exist.

Even if you don't have TFSA capacity standing by, if you have a stock trading only slightly above your ACB on the day that the market causes it to spike by 10%, you could transfer it to your TFSA, then withdraw it from the TFSA before the end of the calendar month. You'll pay a 1% penalty for over-contributing for a month, but shelter 10% in capital gains.
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Re: TD Direct Investing (was Waterhouse) Service

Postby kcowan » 07 Jan 2017 09:36

Just to ensure I understand this strategy:
Stock is worth $100 and jumps to $110.
I transfer it in at $100. Then take it out at $110 the same month and pay $1.10
or I can wait a month and if it grows to $120 and draw it out and pay $2.40?
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Re: TD Direct Investing (was Waterhouse) Service

Postby Hammerer » 07 Jan 2017 14:39

I think the penalty would be based on the excess contribution, so just $1?

Per CRA's "RC243-SCH-A Schedule A Excess TFSA Amounts" here: http://www.cra-arc.gc.ca/E/pbg/tf/rc243 ... EADME.html
"Any income that is attributed to deliberate over-contributions will be subject to the tax on advantages.".

Negligence is a great excuse for not following the law.

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adrian2
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Re: TD Direct Investing (was Waterhouse) Service

Postby adrian2 » 07 Jan 2017 17:59

Hammerer wrote:I think the penalty would be based on the excess contribution, so just $1?

Yes.

Bonus:
a) if you take out $110, you've increased your TFSA room by $10, or
b) if you take out $100 (about 90% of the shares you bought), the remaining shares stay and grow in your TFSA "forever" with no penalty, even if on day #1 you had no room for them.
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Re: TD Direct Investing (was Waterhouse) Service

Postby cardhu » 09 Jan 2017 02:10

Hammerer wrote:Sadly, my VCN is close to its ACB... maybe even closer once I factor in any ROC.

As discussed, the ideal candidate for this move would be one that is close to its ACB ... just a hair above ACB would be perfect ... sadly, though, significant single-day moves almost never occur in ETFs ... they are typically the domain of individual stocks.

adrian2 wrote:Even if you don't have TFSA capacity standing by, if you have a stock trading only slightly above your ACB on the day that the market causes it to spike by 10%, you could transfer it to your TFSA, then withdraw it from the TFSA before the end of the calendar month. You'll pay a 1% penalty for over-contributing for a month, but shelter 10% in capital gains.

But if CRA deems it a deliberate move, the penalties (plural) would more than offset the gains, resulting in a net loss (see below).

kcowan wrote:Stock is worth $100 and jumps to $110.
I transfer it in at $100. Then take it out at $110 the same month and pay $1.10
or I can wait a month and if it grows to $120 and draw it out and pay $2.40?

Assuming you are working through adrian’s proposal, the 1% only applies to the overcontribution (as Hammerer pointed out) ... so $1.00 even ... but then if CRA determines that you are a smart guy who keeps good records, and you knew perfectly well that you didn’t have any TFSA contribution room, then you’d pay an additional tax of 100% of the advantage ... so an additional $10, for a total tax of $11.00 ... leaving you $99 net of tax.

Or you could wait another month and pay $12.00, leaving you with $98 net of tax.

Hammerer wrote:Negligence is a great excuse for not following the law.

In the case of an inadvertent overcontribution, the 1% per month penalty would usually more than offset the inadvertent benefit ... in other words, it’d usually be enough to produce a net loss ... the additional tax on advantages (which is separate from, and additional to, the 1% per month penalty) would ensure it results in a loss, in those cases where it was deemed intentional.

I suppose they figured that for the inadvertent cases, a net loss is sufficient penalty, and an even bigger net loss would be a case of hunting ants with an elephant gun.



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