Scenario 1: You have 100 shares of ABC @ $10 Current ABC price: $5 "In the context of Canadian tax law, an "in-kind" transfer of assets (where assets are transferred to a registered account like an RRSP or TFSA) generally denies a capital loss, which you cannot then deduct against other income or capital gains. Canada Revenue Agency." This is basically the superficial loss rule. Why can't we just transfer the position over at the current avg price ($10) and avoid triggering a loss that can't be deducted anyway? Also, How would it work with profits? Scenario 2: You have 100 shares of ABC @ $5 Current ABC price: $10 "Using an in kind transfer can also make sense from a tax perspective. Selling assets for an in cash transfer could trigger capital gains tax if those assets appreciated in price while you held them. With in kind transfers, you can avoid these tax consequences since you're just moving assets from one place to another." So if you did transfer over the assets, what happens to your $5 in profits? On the flip side, using this logic, if you transferred over in scenario 1, you would be lowering your avg price and therefore reducing your capital loss, which is essentially an "inverse capital gain" that apparently will not trigger a tax event????? These explanations are totally contradictory! I mean if it doesn't trigger a capital gain when you transfer then it shouldn't trigger a capital loss either.
Already figured it out. Basically, an "in kind" transfer does nothing. It's still a sale at market value which triggers a tax event be that a capital gain or capital loss which the latter will not be tax deductible as you are "re-purchasing" the same asset...aka the superficial loss rule.