Weekly Tax Tips
Sell non-qualified assets in your RRSP before
December 31
Date: 9 Dec 2011
There are specific rules as to the types of assets your RRSP can hold. If you have a self-directed RRSP, you may have purchased assets which don’t qualify. If this purchase happened on or before March 22, 2011, then the cost of the asset is included in your income in the year of purchase. You’re allowed a deduction for the amount of the proceeds when the asset is sold, up to the original inclusion. Therefore, if the purchase and sale are in the same year, the deduction may offset a part or all of the income. So, make sure your RRSP sells non-qualifying assets acquired on or before March 22, 2011 before December 31, 2011.
There are proposed changes, arising from the 2011 Federal budget, to the consequences of acquiring non-qualifying investments in your RRSP. For such assets acquired after March 22, 2011, a tax equal to 50% of the amount of such investment will apply to the RRSP annuitant. Where the non-qualifying investment is disposed of, the tax will be refunded. Therefore, if the purchase and sale are in the same year, the tax and the refund will be offset. For these acquisitions, it will be beneficial to dispose of the non-qualifying assets before December 31, 2011.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 9 Dec 2011.
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