Question about transferring stocks held in a Canadian RRSP to a


M

Melandre

Scenario: Stock is held by a retiree (therefore, yearly
income is not expected to raise or decrease much more than
it is now). Stock was bought at $60 but is now at $5.
Let's say the retiree had 1000 shares so current value is
$5000.

I understand it is possible to move a stock out of a RRSP
(without actually selling and rebuying the stock) as long as
income tax is paid on the value of the stock (if I
understand correctly, stocks become earned income when taken
out of a RRSP).

Let's assume that the stock starts going up and that it is
worth $20 when the retiree dies and the stock must be
capitalized (and taxed accordingly) during the estate's
disposition.

In the above scenario, wouldn't it make sense to transfer
now the stock from an RRSP account to a non-RRSP
(investment) account at $5/share rather than wait in the
future when the stock has increased to $20? If transferred
now, the payable income tax would likely be in the $1000
range. If sold and/or transferred as part of an estate
disposition, it seems like the tax payable would be
substantially more!

Also, for capital gains/losses calculations, if the stock
transfer (from RRSP to non-RRSP) occurs when the stock value
is at $5 per share, would the stock acquisition price
remained at the initial purchase price of $60 (therefore
generating a capital loss at selling time) or would it be
fixed at the new transferred price of $5 (then generating a
capital gain if the stock actually goes up to $20)?

I must admit I am a bit confused as to what would be the
best course of action in the above situation. Note that the
retiree is already in a low taxation bracket receiving
primarily pension income.

Andre
 
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