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Triggering losses by transferring investments to a TFSA – MoneySense

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Photo by Jonas Leupe on Unsplash

Q. I just transferred 200 shares of an ETF from my margin account to my TFSA at a loss. Can I claim the loss, or does it fall into the 30-day rule?
–Stavros

A. Investments such as stocks, exchange-traded funds (ETFs) and mutual funds can generally be transferred “in-kind” between accounts, so that the investment is transferred from one account directly to the other without selling it. When an investment is transferred from a non-registered investment account, like a cash or margin account, into a tax-free savings account, the transfer is considered an eligible TFSA contribution. The contribution amount is based on the market value of the transferred investment at the time of transfer. 

The “30-day rule” you are referring to, Stavros, is called the “superficial loss rule.” A superficial loss results when a capital loss is triggered in a taxable account, but the same investment is purchased in another account within 30 days before or after the loss is incurred. 

The superficial loss rule applies to not only your repurchase of the investment, but also a repurchase by your spouse, a corporation you control, or a trust with you or your spouse as a beneficiary. The rule has been put in place to prevent Canadians from avoiding tax by selling an investment, only to have a partner or corporate repurchase it on their behalf.

In the case of a transfer of an investment from your non-registered margin account to your TFSA, Stavros, this does not result in a superficial loss. However, the Income Tax Act does deny a loss triggered on a deemed disposition of an investment at a loss upon transfer to a TFSA or registered retirement savings plan (RRSP). So, although the superficial loss rule would not apply, the result would be the same—your capital loss would be ineligible. 

Interestingly, if you transfer an investment in kind that is trading at a capital gain, the capital gain is triggered and is taxable. 

In order to successfully claim a capital loss, Stavros, you would need to sell an investment and transfer the resulting cash proceeds to your TFSA. This may result in transaction costs to sell, and additional transaction costs to reinvest in your TFSA. If the capital loss tax savings is more than the transaction costs, it probably makes sense to trigger a loss by selling and transferring cash. 

If you want to repurchase the same investment in your TFSA, remember you must wait at least 30 days in order to do so, otherwise the superficial loss rules will apply even if you sell the investment before contributing. 

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Lucinda wonders how to organize investments after the coronavirus accelerated her decision to sell her house – The Globe and Mail

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Her existing portfolio is a mixture of ETFs and mutual funds with an asset mix of 48-per-cent stocks and 52-per-cent cash and fixed income.

Fred Lum/The Globe and Mail

At the age of 60, Lucinda is going from being without contract work and collecting the Canada Emergency Response Benefit to wondering how to invest and manage about $1.5-million – the net proceeds from her house sale in downtown Toronto. The deal, for a total of $1.7-million, is set to close in September.

“The [COVID-19] pandemic accelerated my decision to sell my house in case of a significant drop in housing prices,” Lucinda writes in an e-mail, and because contract work in communications is now hard to come by.

“I fear I won’t be able to find work anymore, meaning I might need to cut into my savings, which I wanted to avoid. So now I need guidance on how to map out my retirement savings strategically,” she adds.

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“My plan had been to take a few months off to attend to house repairs and then look for another contract in the spring,” Lucinda writes. “Then the pandemic hit and the contracting job market – combined with my experience level – led me to conclude it may take a very long time, if ever, for me to be employed again.”

She has no plans to buy another place and has rented an apartment for September. A key goal is to help her daughter, her only child, who has just graduated from university, to get established.

A self-directed investor who uses a mixture of mutual funds and exchange-traded funds, Lucinda wonders how best to structure her investments to last a lifetime. She also wants to leave as much as possible to her daughter. She wonders, too, when to begin collecting Canada Pension Plan benefits. Her target retirement spending goal is $45,000 a year after tax.

We asked Matthew Ardrey, a vice-president and portfolio manager at TriDelta Financial Partners in Toronto, to look at Lucinda’s situation.

What the expert says

“Like many Canadians these days, Lucinda’s working life has been cut short by COVID-19,” Mr. Ardrey says. “So taking stock of her financial picture today and where it is going in the future is a prudent exercise.”

Lucinda estimates she will net $1,474,000 from her house sale after she pays off her mortgage and covers closing costs, the planner says. Her existing portfolio is a mixture of ETFs and mutual funds with an asset mix of 48-per-cent stocks and 52-per-cent cash and fixed income. The stocks are slightly overweight to Canada, but are otherwise well diversified geographically, he says.

“The historical returns on her portfolio asset mix are 4.39 per cent, with investment costs of 0.79 per cent, leaving her with a net return of 3.6 per cent,” Mr. Ardrey says. If inflation is assumed to be 2 per cent, this leaves her with 1.6 per cent above inflation, he adds.

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If Lucinda sticks to her modest spending target of $45,000 a year to the age of 90, she would leave an estate of about $2.4-million in 2050, the planner says. She could spend another $42,000 every year before exhausting her capital. “That being said, I would not recommend this level of spending unless it is nearer to the end of her life, because there is no real estate to fall back on as a cushion.”

Lucinda has expressed concern about the direction of the stock market and low returns on fixed-income securities, the planner says. “She certainly has justification for her concerns.” The five-year Canadian government bond yield is a scant 0.31 per cent. “Though bond [prices] have had a great 2020 so far, in part due to interest-rate cuts, the long-term future of this asset class is definitely in question,” Mr. Ardrey says.

First off, Lucinda may want to look to an actively managed bond fund portfolio with solid yields that she can continue to hold for the coupons (interest payments), Mr. Ardrey says. Actively managed funds tend to do better in difficult markets. She is holding bond ETFs, most of which passively track market indexes.

With her increased wealth, Lucinda should consider hiring an investment counselling firm, which is required by law to act in the best interests of its clients, he says. (For a list of such firms, see the Portfolio Management Association of Canada website at https://pmac.org/.)

These firms can “create a strategy for her that will provide solid, ongoing income from both traditional and alternative asset classes,” the planner says. He recommends an asset mix of 50-per-cent equities, 20-per-cent fixed income and 30-per-cent alternative income – a class that includes funds that invest in private debt and income-producing real estate. The addition of alternative income investments, which do not trade on public markets, has the potential to boost fixed-income returns while offsetting the volatility of stock markets.

“The next couple of years will continue to be volatile in stocks,” he says. “But if she can ignore the volatility and focus on the dividend payments, she can use that income to pay for her lifestyle (with government benefits) without drawing on her capital.”

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Lucinda should invest her new capital gradually, especially when it comes to buying stocks, Mr. Ardrey says. “I would not want to see Lucinda invest a substantial amount of capital, only to have the markets fall 20 per cent the following month.”

As for when to start taking Canada Pension Plan benefits, the planner suggests Lucinda wait until she is 65. “If Lucinda took her CPP at age 60, she would get $7,848 a year. So by the time she turned 74, she would have collected a cumulative total of $109,872 ($7,848 multiplied by 14 years).”

If she waited until age 65, Her CPP would be $12,144 a year. In 9 years, she would have collected $109,296.

“So, if Lucinda lives beyond age 74 and a few months, she would be better off taking CPP at age 65 than 60,” the planner says. Getting the larger amount starting at 65 would overtake the advantage of getting the smaller amount earlier starting in her 74th year, he adds.

Client Situation

The person: Lucinda, 60, and her daughter, 26.

The problem: How to invest the proceeds of her house sale to last a lifetime and leave an inheritance for her daughter. When to take CPP.

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The plan: Start CPP at 65. Consider hiring a professional investment counselling firm. Enter the stock market gradually. Consider actively managed bond funds and alternative fixed-income investments to potentially boost returns and lower volatility.

The payoff: The comfort of knowing she may be able to spend a little more than she plans and still leave a substantial estate.

Monthly net income (budgeted): $3,750.

Assets: Bank accounts $52,000; mutual funds $48,400; TFSA $61,500; RRSP $374,600; net proceeds of house sale $1.5-million. Total: $2-million.

Monthly outlays (forecast): Rent $1,650; home insurance $15; electricity $50; transportation $150; groceries $400; clothing $50; vacation, travel $300; personal discretionary (dining, entertainment, clubs, personal care) $500; health care $230; phone, TV, internet $90; miscellaneous future discretionary spending $315. Total: $3,750.

Liabilities: None.

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Want a free financial facelift? E-mail finfacelift@gmail.com.

Some details may be changed to protect the privacy of the persons profiled.

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IRICoR makes additional investment in ExCellThera Français – Canada NewsWire

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Investment will support clinical trial in sickle cell disease

MONTREAL, Aug. 7, 2020 /CNW Telbec/ – IRICoR, a Centre of Excellence in Commercialization and Research with a focus on drug discovery, announces a new investment in ExCellThera Inc., a clinical-stage cell and molecular medicine company which it co-founded in 2015.

IRICoR’s investment enabled ExCellThera to secure the co-funding required in connection with the grant awarded to it from the California Institute for Regenerative Medicine (CIRM) for a Phase 1 clinical trial using its most advanced technology, ECT-001, for the treatment of severe sickle cell disease.

The study will be conducted in California to demonstrate the safety and feasibility of the Quebec-generated ECT-001 Cell Therapy in children and young adults suffering from severe sickle cell disease.

Sickle cell disease is an inherited blood disorder most commonly affecting people of African descent. It is caused by a genetic mutation characterized by a sickle-shaped deformation in red blood cells. This mutation prevents the blood from carrying oxygen effectively through the body and can obstruct the bloodstream, causing extreme pain, recurrent hospitalization and organ failure. It is estimated that sickle cell disease affects about 100,000 people in the United States and Canada.

“At IRICoR, we are extremely pleased to be part of the growing ExCellThera story. The company has repeatedly shown its success in key clinical programs. This major award from the CIRM is an additional opportunity to expand the potential of ECT-001 in yet another important indication. Once again, IRICoR has shown its active commitment through the support of one of its spin-off companies for the benefit of patients suffering from a severe genetic disease”, said Dr. Nadine Beauger, Chief Executive Officer of IRICoR.

“The support provided by IRICoR to ExCellThera since its founding has been invaluable. IRICoR initially recognized the importance of launching this spinoff company to offer options to the tens of thousands of patients every year who are diagnosed with blood disorders, and we are pleased about IRICoR’s ongoing confidence in ExCellThera through this new investment. This trial is a source of new hope for patients suffering from severe forms of sickle cell disease, and who unfortunately do not have a matched donor allowing them access to a hematopoietic stem cell transplant”, added Dr. Guy Sauvageau, CEO and co-founder of ExCellThera.

About IRICoR

Designated as a Centre of Excellence in Research and Commercialization (CECR) by the Canadian government and based at the Institute for Research in Immunology and Cancer (IRIC) of the Université de Montréal, IRICoR is a pan-Canadian leader in the de-risking of early-stage assets in the field of drug discovery. IRICoR’s mandate is to accelerate the discovery, development, and commercialization of novel therapies in cancer and rare diseases. Since 2008, IRICoR has been successfully investing in and supporting selected high-value projects in order to rapidly translate early-stage innovation into potential new therapies, through either co-development partnerships with the biopharmaceutical industry or the creation of spin-off companies. IRICoR seamlessly combines its business-related expertise with access to industry-level drug discovery capabilities, providing selected academic and industry projects with access to its network of experts and cutting-edge infrastructure, including one of the largest academia-based drug discovery unit in Canada. IRICoR’s major funding sources include the federal CECR Program, the Ministère de l’Économie et de l’Innovation du Québec (MEI), and collaborative partnerships with the biopharmaceutical industry.

For more information about IRICoR: iricor.ca

About ExCellThera Inc.

ExCellThera is a clinical-stage molecular medicine biotechnology company delivering molecules and bioengineering solutions to expand stem and immune cells for use in novel one-time curative therapies for patients with hematologic malignancies, autoimmune and other diseases. ExCellThera’s lead technology combines a proprietary small molecule, UM171, and an optimized culture system. In pursuit of better treatments for patients, the company is building out its portfolio of products, as well as supporting best-in-class clinical trials.

 www.excellthera.com

SOURCE IRICOR

For further information: Catherine Cardinal, Manager, Communication and Media Relations, IRICoR, [email protected], 514-220-9209; Alix Molinier, Project Manager, IRICoR, [email protected]

Related Links

https://www.iricor.ca/fr/

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Feds hope to get more glasses clinking with investment – Belleville Intelligencer

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Sandor Johnson, owner of Potter Settlement Artisan Winery, received $100,000 from the federal government’s Canadian Experiences Fund to help enhance culinary tourism experiences, expand their product offerings and support local jobs.
TIM MILLER FILE PHOTO


jpg, BI

The federal government wants to hear more clinking of glasses at microbreweries, cideries and wineries throughout Eastern Ontario this summer and into the future.

The region is a Canadian gem, a rich and diverse region where visitors can enjoy a range of artisanal foods and drinks in a natural setting. Eastern Ontario’s tourism industry welcomes tens of thousands of visitors each year and supports an array of good, local jobs, from entrepreneurs and artists to farmers, wine makers and distillers.

Over the past months, Canada’s tourism industry has been hit hard by COVID-19. Local microbreweries, wineries and craft cider producers have all felt the impact, with a significant drop in revenues. The Canadian government has implemented a series of significant measures to help these businesses keep their employees, pay rent and get access to capital, and is committed to helping them support jobs and opportunities as the economy reopens.

Friday, to mark International Beer Day, Mélanie Joly, Minister of Economic Development and Official Languages and Minister responsible for the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), announced $250,000 through the Canadian Experiences Fund (CEF) to help three Eastern Ontario producers enhance culinary tourism experiences, expand their product offerings and support local jobs.

“Eastern Ontario is a beautiful and bountiful part of our country, and it’s no surprise that visitors are drawn by all that it has to offer, including incredible craft beer, cider and wine. With our tourism industry feeling the impact of COVID-19, this important investment from FedDev Ontario will help three local businesses not just survive, but thrive. Our message is clear: we’ve been here for you with significant measures, we’re here for you now as our economy reopens and we’ll get through this, together. We’re working with you to support good, local jobs and help Central Ontario’s economy come back strong,” Joly said.

The investment will help three local producers grow their businesses, extend their tourism seasons and attract more visitors, both to their properties and the wider region. It will help these growing enterprises recover from the impact of COVID-19 while creating jobs and opportunities in their communities.

Kings Mill Cider, a family-run craft cider producer, located just north of Stirling, received $75,000 to expand its operations into shoulder seasons and improve the tourist experience. With this investment, King’s Mill has completed a new covered walkway and enclosed deck overlooking the orchard, a renovated kitchen and taproom area, improved road signage and parking and introduced new experiences including a wood-fueled pizza oven, walking trails and overnight tent camping.

Kings Mill Cider has two full-time employees and four part-time employees. The company uses local product and hires local personnel whenever possible.

“The Canadian Experiences Fund contribution through FedDev Ontario has transformed Kings Mill Cider from a small, rural cider producer to an agricultural tourist attraction,” said Kees Morsink, of Kings Mill. “The new features of a covered patio, additional parking, pizza oven, yurts and better signage have helped to make this Hastings County location a must-visit destination.”

Located in Tweed, Potter Settlement Artisan Winery received $100,000 to expand its tourist season by improving the buildings and property. It has added a pizza oven that can serve 50-100 customers per day, water features and new tourist amenities. Potters Settlement combines a marriage of rustic, old-world charm with up-to-date winemaking techniques. They have 12 part-time employees and their experimental vineyards has garnered them the Ontario Premier’s Award for Agri-Food Innovation for pioneering grapes for Canada as recognized by The Grape Growers of Ontario.

“The Potter Settlement team is grateful to FedDev Ontario and the Canadian Experiences Fund for this vital contribution to help us improve our facility to enable us to draw precious tourism, increase employment and boost the economy of our community and region,” said owner Sandor Johnson. “As the only winery in Hastings County and Canada’s accredited pioneer of international award-winning organic, disease-resistant and cold-resistant grapes, these funds are helping to ensure our viability as a farm, tourist destination and an economic focal point in Eastern Ontario for generations to come.”

With more than 200 years of farming heritage, Bath’s MacKinnon Brothers Brewing uses the hops, wheat, and barley grown on their farm to brew beer. Brewing began in 2014 and they currently employ eight full-time staff in addition to the four owners. MacKinnon Brothers received $75,000 to attract more visitors by enhancing its property and hosting events. It’s building a permanent outdoor timber-frame stage to host music festivals, performances by a local theatre company and other events, which will help draw more tourists during the shoulder season.

“We at MacKinnon Brothers Brewing are very excited for the opportunity to build a permanent stage at the brewery, allowing us to continue to focus on local music and theatre. We are grateful to FedDev Ontario and the Canadian Experiences Fund for this contribution and look forward to many great shows in the future,” said Ivan MacKinnon.

In Ontario, tourism accounts for $39.4 billion of GDP and directly and indirectly supports more than 820,000 jobs.

“Tourism businesses, including artisanal cider, craft beer and wine producers, contribute to the richness of the southern Ontario landscape. The investments made today through the Canadian Experiences Fund will have a positive impact not only on the businesses themselves, but on the local economies that depend on their unique contributions,” said Kate Young, Parliamentary Secretary to the Minister of Economic Development and Official Languages (FedDev Ontario).

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