TFSA question (tax implications related)

[dat_steve]

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

[lowside67]

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

[09k20]

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.