How To calculate Capital Gains after in-kind stock withdrawal from RRIF to non-registered account and then subsequent sale of stock? | Income tax filing | Discussion forum

In November 2008, the Minister of Finance then (Jim Flaherty) had sent out a letter to federally regulated financial institutions about in-kind RRIF withdrawals:

… Many seniors are understandably concerned about the impact of the recent deterioration in market conditions on their financial security and I believe it is important to ensure that they do not face undue obstacles in managing their assets in these challenging times.

A common misconception is that seniors must sell assets to satisfy RRIF withdrawal requirements, something many may not want to do at this time given the recent decline in value of many assets. The income tax rules permit "in-kind" asset transfers to meet the minimum withdrawal requirements – they do not require the sale of assets.

It has been brought to my attention that, in certain circumstances, there may be obstacles to in-kind asset transfers within financial institutions. It has also been suggested that some financial institutions may not be advising clients of this option where it does exist.

…

Very interesting info about in-kind withdrawals from a RRIF. Thanks. A couple of questions.

1) Does it also apply to LIFs?

2) Have provincially registered institutions adopted the same policy?

amidat said

Sorry, I don't know the answer to these questions. I'm not a subject matter expert in this area.  

Since you are dealing with iTrade, I assume they are a federal (not provincial) institution so you should be fine based on the 2008 letter from the then federal Minister of Finance.

I have a RRIF with Scotia iTrade. The RRIF is actually held by Nova Scotia Trust Company as trustee which is bound by Section 146 of the Income Tax Act. There is no provincial differentiation exception for the peculiarities of Quebec regarding successor annuitants.

LIFs are different given they can be provincially regulated and the question being asked here about withdrawals in kind needs to be referred to the financial institution holding the LIF. That all said, it is really not a big deal to sell within the LIF, withdraw the cash and then re-purchase what one wants. $10 buy/sell commissions are simply not a big deal.

Norman1 said
Permitting in-kind withdrawals doesn't make them a mandatory feature. Registered accounts have many features that are permitted but rarely provided.   

Agreed and therefore not a guarantee, but an FI would be foolhardy not to accommodate the most sought after ones, such as withdrawals-in-kind. The sophisticated investor would likely move elsewhere notwithstanding two $10 buy/sell commissions is hardly an economic crisis.

Scotia iTrade had to eventually move to 'real' USD RRSP sub-accounts about 5?10? years ago rather than their ridiculous 'USD friendly' variety because investors were going elsewhere. When I opened my RRIF, they automatically provided a USD sub-account even though I did not ask for it. Common sense eventually prevails most of the time.

There is source tax withholding should the withdrawn shares be worth more than the minimum RRIF withdrawal for the year.

One may still need to sell something in the RRIF for cash as part of the withdrawal to cover the tax withholding.