Do my RRSP contributions need to be made with cash?
No. If you use a Self-Directed account and you have investments held in a non-registered account with the same financial institution, you can deposit a sufficient quantity of the investment into your RRSP as your contribution. This is called a contribution in kind.
For example, if you are allowed to contribute $2,500 to your RRSP and you hold $2,500 of a bond, mutual fund or common shares outside of your RRSP account, you can have the $2,500 investment deposited into your RRSP as your contribution.
Keep in mind that the Canada Revenue Agency (CRA) has certain guidelines governing assets deposited into a registered account. In general, if the investment deposited into an RRSP has a capital gain associated with it, then even though the investment is now owned by your RRSP, it will deem to have been sold thereby triggering a taxable capital gain. If on the other hand the deposited/transferred asset has a capital loss associated with it, the loss will not be recognized by CRA and it cannot be used to offset past, current, nor future taxable capital gains. The tax benefit of a capital loss will be lost if the loss results from the deposit of the investment into an RRSP account.
Before contributing to your RRSP in kind, you should understand the income tax considerations and ensure that this type of contribution makes sense.
- What income is included in the calculation of my allowable RRSP contributions?
- What income does not qualify as Eligible Earned Income?
- How is my RRSP contribution amount calculated?
- What is a Pension Adjustment (PA) and why is it deducted from my allowable RRSP contribution room?
- If I leave my current employer and my pension benefit is less than the Pension Adjustments (PAs), do I get my RRSP contribution room back?
- What is a Past Service Pension Adjustment (PSPA)?
- What is the maximum I can contribute to my Individual and Spousal RRSPs for 2010, 2011 and 2012?
- What is the maximum amount I can contribute to my or my spouse's RRSP in 2013 and 2014?
- What are the deadlines for making contributions and claiming them on my income tax return?
- Do I need to deduct all of my RRSP contributions in the tax year they were made?
- I think I have over-contributed to my RRSPs. What can I do?
- Can a deceased person's estate contribute to the deceased's RRSP if they still have allowable RRSP contribution room available?
- Is there an age limit for making RRSP contributions?
- I currently have allowable RRSP contribution room that I will never be able to use. Can I gift or transfer it to another person?
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