First RRSP surgery is completed!

In early January, I completed the withdrawal of 10 stocks from my RRSP account.  I directed 9 of these stocks to my margin account with Interactive Brokers.  The 10th stock, a REIT, was directed to my TFSA at Questrade.

With the stock market correction in December, I sold 10 stocks in my RRSP account that experienced serious drops in price in 2018.  The proceeds amounted to $78,400.  At the market top in September, these stocks were worth $119,599.  Therefore, these stocks were down 35% from their price tops.

Note that on this withdrawal, the broker retained 30% of the amount as a withholding income tax for the governments.  The withholding tax amounted to $23,505.

When I purchased these same stocks in my margin account, I borrowed the amount withheld for taxes.  Presently, Interactive Brokers charges 3.107% in annual interest on Canadian dollar loans.  Questrade transferred the rest of the withdrawn funds to my margin account.

Note that I have no intention of getting rid of these stocks.  I want to continue collecting the increasing dividends these stocks pay quarterly.

With the large RRSP withdrawal, my taxable income will be much greater this year.  Thus, this year, the Canadian dividends I receive from these transferred stocks will be taxed at 35%… but in the following years, the tax rate will be closer to 17.5%!

Pleasant surprise, after I purchased the stocks in my margin account, most of the stocks profited from the increasing stock market in January.  Only half of these theoretical capital gains will be taxed from now on!

So here is what 2019 looks like to me:

  • I will pay about $730 in interest on my margin loan – this interest is tax deductible at the regular rate
  • I will receive $1669 in Canadian dividends – taxed at the lower rate
  • I will receive $1631 in US dividends – taxed at the regular rate less the US withholding tax
  • I will receive $290 in distributions from my REIT in my TFSA… tax free

With these 9 stocks now outside my RRSP account, I will transfer these into my TFSA over the next years according to the annual limit.  Therefore, the dividends these stocks pay will become tax free.

This month, I will withdraw another $26,412 worth of stocks that I will repurchase in my margin account…


My fund and stock allocations indicate that the value of my Canadian stocks in the base consumption sector is the most below the target.  Therefore, I used my January dividends in my RRSP account to buy, for the first time, shares of Alimentation Couche Tard (ATD.A-T).  After all, I usually purchase my gasoline at its stations; so I decided to put the profit on my purchases back in my wallet!

For my $6000 contribution my TFSA, I forgot to transfer my newly, outside my RRSP account stocks…  Instead I bought the Brookfield Renewable Resources (BEP.UN-T) units I withdrew in my RRSP withdrawal.  I put this holding in my TFSA as its distributions are fully taxed, unlike Canadian dividends.

Until next month

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