Comtech CU in ON have promo GIC for investment $10000 and above | GIC discussions | Discussion forum

In-kind contributions to RRSP's and TFSA's are allowed by tax rules.

Value of an in-kind GIC contribution would include accrued interest. The accrued interest will need to be reported. This is from RBC Dominion Securities: Making Contributions to Your RRSP:

Contributions Made by Securities

If you don't have the cash to make your RRSP contribution, you can contribute eligible investments from outside your RRSP at their fair market value. For tax purposes, investments transferred into the RRSP (i.e. an in-kind contribution) are treated as if the investment was actually sold. Therefore, this transfer triggers a taxable capital gain.

Unfortunately, if the fair market value of the transferred investment is less than its original cost, the resultant capital loss cannot be claimed. Also, any accrued interest up to the transfer date must be reported as income (i.e. interest that has been earned but not paid).

Unfortunately, not all TFSA accounts are full featured and can accept an in-kind contribution. That depends on the account and the financial institution.

Loonie said

So, the question might be how much interest, if any, has been "earned but not paid". This is what I was thinking about in my previous post but couldn't find the right words to explain it.
I still find it ambiguous. Has the interest been "earned" if the first year of the GIC is not yet completed? It's not cashable at that point, so it seems to me it's a matter of opinion.

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I think the interest, for tax purposes, is "accrued interest" which is not necessarily "earned interest."

It is similar to the accrued interest, for tax purposes, of strip bonds that must be reported and taxed annually, even though there's no legal right to any funds from the issuer until maturity.

Loonie said

I find the language confusing. In this case, can we say that no interest has been "accrued" in less than one year into a GIC if it has annual compounding? And can we be confident that CRA would agree?

For tax purposes, as well as bond trading, interest would deem to accrue daily. Each day, 1/365 or 1/366 of the next annual interest payment would accrue.

Norman1 said

Loonie said

I find the language confusing. In this case, can we say that no interest has been "accrued" in less than one year into a GIC if it has annual compounding? And can we be confident that CRA would agree?

For tax purposes, as well as bond trading, interest would deem to accrue daily. Each day, 1/365 or 1/366 of the next annual interest payment would accrue.

So, then, my earlier advice to Jon (#4) suggesting he reduce the amount going into the GIC accordingly, would apply?

Thanks.
I hope Jon is still listening and hasn't bought it yet..
Others may also find this helpful.

The amount of interest on a one-year contribution would be quite small, but, still, I believe CRA dings you every month for an overcontribution, so you don't want to go there. I suppose, if necessary, you could transfer it back out again? But that defeats the whole purpose of buying it in the first place.

Oh! Jon, you said in your original post that you were maxed out in TFSA, so I thought you would only have the 2017 new room at $5500. Perhaps you made a withdrawal in the interim.

In any event, just make your GIC for $8450 instead of $8500 and you should be fine when you transfer it.

too bad.
I suspect there may be some better promos out there in January, especially since Tang doesn't seem to be chasing that money this year. However, it's good to keep some liquid.
Alterna has a pretty good rate for eSavings or eTFSA,, and you don't have to renegotiate every few months. You could always deposit in TFSA for the tax benefit for as long as you can leave it there, then, if you need the money, take it out of TFSA and re-deposit the following year or thereafter. Need to check if there's a withdrawal fee though. I know there is a transfer fee.