TFSA question (tax implications related)
 

Probably a silly question but I couldn't get a straight answer from my bank so I was hoping someone here could shed some light on an issue for me:


TLDR:
-have money sitting in mutual fund TFSA account
-want ability to actively trade with a trading TFSA account
-does selling current holdings in MF TFSA account to transfer cash to trading TFSA account constitute a recontribution?


Context:
I currently have money tucked away in a tfsa account at TD bank in one of their mutual funds (ugh!) with 2-3% in management fees. I realized I was leaving money on the table so I decided that I wanted to open up a TFSA with TD Waterhouse to do some small trades here and there and to buy some ETFs that essentially have the same holdings/weightings. My problem is that my TFSA account with TD Bank is currently maxed out for contributions. I figured I would need to sell my current holdings and transfer that cash into the Waterhouse TFSA account.

I'm wondering if, for tax purposes, this transaction would be considered a disposal and a subsequent recontribution (which iirc isn't allowed since I'm already maxed), or am I free to buy and sell within any TFSA accounts as long as I'm not putting "new" money in?

TIA

What you need to do is transfer your TFSA from your managed TD account to a Waterhouse account. I had an existing savings TFSA at ING that was maxed out so I could not withdraw and redeposit much like you as that would definitely be considered going over your limit for the year. What happens is there is a mechanism to transfer from one TFSA to another for exactly this reason. You open a new Waterhouse TFSA trading account which will then have $0 in it. Once the account is open, they will help you with the paperwork to transfer from your other TFSA. You will likely need to cash in your existing mutual funds as I doubt they can be ported over. However, this way you will avoid recontributing and going over your limit.

Hope that helps,
Mark

The maximum contribution is $5000 per year since 2009 and just as long as you do over contribute those amounts , you will not be penalized by the CRA.

The bank will ask you to sign a T2033 to transfer registered (TFSA) funds from your TD securities account to your self directed trading account. This includes transfer to other financial institutions/ banks.

No tax implication on TFSA funds from a sale or transfers just as long as the funds are within the TFSA platform.