Dear Expert:
We have an RRSP GIC invested at a major bank worth about $3,300. We want to transfer it to our daughter for her to use as a down payment on a house later this year. What are the tax implications, and what is the best way to go about it?
Expert Opinion:
Since your GIC investment is inside an RRSP, the only way you will be able to give that money to your daughter to use as a down payment on her home is by deregistering the RRSP and paying the tax on the amount withdrawn. If the value of the GIC is worth $3,300, (assuming no penalty to cash in the GIC prior to its maturity), then there will be a 10% withholding tax on the proceeds being withdrawn (in Quebec, the rate would be 25%). Additional tax may be owing when you file your 2003 income tax return, due in April 2004. The RRSP withdrawal is included in your income at full marginal tax rates; however, you will receive a credit for the 10% tax that the financial institution withheld upon the withdrawal.
While the federal Home Buyer's Plan allows Canadians to withdraw up to $20,000 tax-free from their RRSP to finance the purchase of a first home, it cannot be used to assist your daughter in acquiring her own home.To find out how much an RRSP contribution may save you, try Morningstar's RRSP Calculator.
Do you have a question?All Ask the Expert questions are read and considered. Unfortunately we can't provide individual responses or respond to every question. Please note that questions about specific securities cannot be considered. Click here to Ask the Expert.
No statement in this article should be construed as a recommendation to buy or sell securities or to provide investment advice or individual financial planning. Morningstar Canada does not provide specific portfolio advice and recommends the use of a qualified financial planner when appropriate.
