How To calculate Capital Gains after in-kind stock withdrawal from RRIF to non-registered account and then subsequent sale of stock? | Income tax filing | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

sp_Feed Topic RSS sp_TopicIcon
How To calculate Capital Gains after in-kind stock withdrawal from RRIF to non-registered account and then subsequent sale of stock?
November 24, 2021
5:40 am
amidat
Member
Members
Forum Posts: 25
Member Since:
December 8, 2015
sp_UserOfflineSmall Offline

Example:
1. Let’s say bought 1000 CIBC at $100 (book value or average cost) = $100000
2. Did in-kind 1000 CIBC stock withdrawal from RRIF to non-registered account at $125 (market value) = $125000
3. A year later sold 1000 CIBC at $150 = $150000

Is the capital gains $50000 or $25000?
Is the $125 now considered the book value or average cost (for capital gains calculation) since income tax was already paid at $125 market value when RRIF redemption was done in bullet 2?

Thanks

November 24, 2021
5:46 am
Bill
Member
Members
Forum Posts: 2633
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Agree, $25K is answer, you included $125K in income at time of RRIF withdrawal (I assume initial $100K purchase was inside RRIF), that becomes your adjusted cost base for future gain/losses calculations.

November 24, 2021
6:06 am
amidat
Member
Members
Forum Posts: 25
Member Since:
December 8, 2015
sp_UserOfflineSmall Offline

Thanks...Much Appreciated!

November 24, 2021
6:59 am
COIN
Member
Members
Forum Posts: 311
Member Since:
March 15, 2019
sp_UserOfflineSmall Offline

Interesting scenario. I wasn't aware that you could do an in-kind withdrawal from a RRIF.

Previously, I thought you had to sell the stock inside your RRIF to raise the cash to take-out. Then take the cash to repurchase the stock.

If not too personal, which institution holds your RRIF?

November 24, 2021
7:22 am
Norman1
Member
Members
Forum Posts: 4397
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

In November 2008, the Minister of Finance then (Jim Flaherty) had sent out a letter to federally regulated financial institutions about in-kind RRIF withdrawals:

… Many seniors are understandably concerned about the impact of the recent deterioration in market conditions on their financial security and I believe it is important to ensure that they do not face undue obstacles in managing their assets in these challenging times.

A common misconception is that seniors must sell assets to satisfy RRIF withdrawal requirements, something many may not want to do at this time given the recent decline in value of many assets. The income tax rules permit "in-kind" asset transfers to meet the minimum withdrawal requirements – they do not require the sale of assets.

It has been brought to my attention that, in certain circumstances, there may be obstacles to in-kind asset transfers within financial institutions. It has also been suggested that some financial institutions may not be advising clients of this option where it does exist.

November 24, 2021
8:25 am
amidat
Member
Members
Forum Posts: 25
Member Since:
December 8, 2015
sp_UserOfflineSmall Offline

Scotia iTrade.
To do the in-kind transfers from RRIF you have to phone helpdesk.
All institutions are required to allow in-kind withdrawals from RRIFs.

November 24, 2021
6:09 pm
COIN
Member
Members
Forum Posts: 311
Member Since:
March 15, 2019
sp_UserOfflineSmall Offline

Very interesting info about in-kind withdrawals from a RRIF. Thanks. A couple of questions.

1) Does it also apply to LIFs?

2) Have provincially registered institutions adopted the same policy?

November 25, 2021
7:45 am
amidat
Member
Members
Forum Posts: 25
Member Since:
December 8, 2015
sp_UserOfflineSmall Offline

COIN said
Very interesting info about in-kind withdrawals from a RRIF. Thanks. A couple of questions.

1) Does it also apply to LIFs?

2) Have provincially registered institutions adopted the same policy?  

Sorry, I don't know the answer to these questions. I'm not a subject matter expert in this area.

November 25, 2021
7:51 am
COIN
Member
Members
Forum Posts: 311
Member Since:
March 15, 2019
sp_UserOfflineSmall Offline

amidat said

Sorry, I don't know the answer to these questions. I'm not a subject matter expert in this area.  

Since you are dealing with iTrade, I assume they are a federal (not provincial) institution so you should be fine based on the 2008 letter from the then federal Minister of Finance.

November 25, 2021
8:05 am
Norman1
Member
Members
Forum Posts: 4397
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

The regulatory situation is more complicated with Scotia iTRADE.

Scotia iTRADE is actually a division of Scotia Capital Inc. that is owned by the Bank of Nova Scotia. The Bank of Nova Scotia is a federally regulated bank. But, Scotia Capital is a provincially regulated investment dealer.

November 25, 2021
9:05 am
AltaRed
Member
Members
Forum Posts: 1535
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

I have a RRIF with Scotia iTrade. The RRIF is actually held by Nova Scotia Trust Company as trustee which is bound by Section 146 of the Income Tax Act. There is no provincial differentiation exception for the peculiarities of Quebec regarding successor annuitants.

LIFs are different given they can be provincially regulated and the question being asked here about withdrawals in kind needs to be referred to the financial institution holding the LIF. That all said, it is really not a big deal to sell within the LIF, withdraw the cash and then re-purchase what one wants. $10 buy/sell commissions are simply not a big deal.

November 25, 2021
10:59 am
Norman1
Member
Members
Forum Posts: 4397
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

The Income Tax Act permits in-kind withdrawals from RRIF's. A LIF is a RRIF with additional requirements from a pension act. For example, a maximum annual withdrawal and, with some pension acts, a requirement to purchase an annuity at a certain age.

Permitting in-kind withdrawals doesn't make them a mandatory feature. Registered accounts have many features that are permitted but rarely provided. Holding foreign currencies have been permitted. But, most RRSP's and RRIF's only allow US$. Holding one's own mortgage is still permitted. But, many financial institutions have stopped allowing that.

November 25, 2021
11:17 am
AltaRed
Member
Members
Forum Posts: 1535
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

Norman1 said
Permitting in-kind withdrawals doesn't make them a mandatory feature. Registered accounts have many features that are permitted but rarely provided.   

Agreed and therefore not a guarantee, but an FI would be foolhardy not to accommodate the most sought after ones, such as withdrawals-in-kind. The sophisticated investor would likely move elsewhere notwithstanding two $10 buy/sell commissions is hardly an economic crisis.

Scotia iTrade had to eventually move to 'real' USD RRSP sub-accounts about 5?10? years ago rather than their ridiculous 'USD friendly' variety because investors were going elsewhere. When I opened my RRIF, they automatically provided a USD sub-account even though I did not ask for it. Common sense eventually prevails most of the time.

November 25, 2021
1:02 pm
COIN
Member
Members
Forum Posts: 311
Member Since:
March 15, 2019
sp_UserOfflineSmall Offline

"That all said, it is really not a big deal to sell within the LIF, withdraw the cash and then re-purchase what one wants. $10 buy/sell commissions are simply not a big deal."
This would be the solution, however, not all RRIF/LIF are held with discount brokers and the total sell and then buy back commissions can be more than $10.

November 26, 2021
10:26 am
Norman1
Member
Members
Forum Posts: 4397
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

There is source tax withholding should the withdrawn shares be worth more than the minimum RRIF withdrawal for the year.

One may still need to sell something in the RRIF for cash as part of the withdrawal to cover the tax withholding.

Please write your comments in the forum.