BMO Nesbitt Burns
401-115 Hurontario Street
RRIF Withdrawals in Falling Markets
As a RRIF account holder, the Income Tax Act
requires you to withdraw a minimum amount each year from your RRIF plan
based on your age (or your spouse's age) and the market value of your
account as at the beginning of each year. Given recent market
conditions, you may be concerned about selling investments in your
portfolio due to fallen market values especially since capital losses
within the RRIF cannot be used to offset capital gains in taxable
We want to remind our RRIF clients that they have the
option of making RRIF withdrawals on an in-kind basis rather than in
cash. This choice ensures that you do not have to sell your investments
now at a loss and can instead hold onto your investments and sell them
at a later time thereby providing you with greater flexibility.
part of our ongoing commitment to our clients, we have included some
general information below related to in-kind withdrawals and their tax
implications that may help as you consider your options regarding your
current and future annual RRIF payments.
An in-kind RRIF withdrawal may be suitable if you:
General tax implications of an in-kind withdrawal:
not yet made the minimum required withdrawal from your RRIF. If you
have already taken your minimum withdrawal for the year you are not
required to make any further withdrawals.
- Do not need the cash from your RRIF to fund immediate expenses.
- Do not want or need to sell any securities.
a non-registered account that can hold the securities/investments
withdrawn from your RRIF. If you do not have a non-registered account,
one will have to be set up for you.
aggregate amount of any cash withdrawals and the market value of
investments withdrawn in-kind from your RRIF must be at least equal to
the minimum withdrawal required from the RRIF.
- The market
value of the investments withdrawn will be taxable (you will receive a
T4RIF slip for the value of the investments withdrawn in-kind).
- The amount withdrawn will be taxable, even though you have not received cash.
- As long as only the minimum amount is withdrawn from your RRIF, no withholding taxes will be charged.
- The tax cost base for an investment withdrawn in-kind is the market
value at the time of the withdrawal - not the price originally paid for
- When the investment is later sold, any
increase in the value of the investment after the withdrawal will be
considered a taxable capital gain - any subsequent decline in value will
be considered a capital loss for tax purposes.