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A "Cash Swap"
involves the exchange of assets between you and your RRSP, SD RRSP,
RIF or SD RIF. For example, if you hold shares of an RRSP-eligible
company in your personal name, and have cash in a SD RRSP, you can
sell the shares to the SD RRSP for Fair Market Value. The SD pays
you for the shares in cash. This payment is not a redemption, and
does not get added to your Taxable Income for the year.
The sale of the securities
to the SD RRSP is however a Deemed Disposition, and is therefore
liable for Capital Gains Tax - if there was a gain in value. 50%
of the Capital Gain is currently subject to taxation.
Note that a loss in value realized
by the sale of securities to your SD RRSP is not allowed by Revenue
Canada as a Capital Loss for taxation purposes.
For more information on cash swaps
see the Newsletter
from Davidson
& Company, Chartered Accountants. .
NetEquity Capital Partners' products can be used
in a number of Cash Swap situations.
| When Might You
Use A Cash Swap? |
Cash Swaps are a way of accessing
cash in your RRSPs or RIFs without triggering Redemption Income
Tax.
If you need cash for some purpose, currently hold securities
which you don't want to sell or can't sell because of resale
restrictions, and have cash in an RRSP or RIF that you don't
want to redeem because of the Income Tax consequence of the
redemption, you can sell the stock to the RRSP at Fair Market
Value to bring out an equivalent amount of cash tax exempt.
You can use a Cash Swap to realize the Capital Appreciation
in a security you hold without giving up ownership of the
security. For example, if you purchased an investment for
$20,000 and it has a Fair Market Value of $40,000, you can
sell it to your RRSP or RIF to bring out $40,000, with the
increase in Value of $20,000 subject to Capital Gains taxation
but with the payment of $40,000 exempt from taxation.
Other examples of Cash Swaps are included
in sections on specific investment products. |
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Cash
Swap Documentation Requirements
NetEquity Capital Partners
will assist you with the preparation of the documentation
needed to undertake a Cash Swap with one of its investment
products. While each Trustee has varying "paperwork"
requirements, they are in general similar and our staff
are available to assist you.
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Please go to Contact Us if you wish to discuss Cash Swap strategies
with a company representative.
Copyright © 2007 NetEquity All rights reserved.
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