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Putting shares in a private company into a TFSA?

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  • Aug 26th, 2009 4:57 am
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Dec 11, 2005
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Putting shares in a private company into a TFSA?

I have a bunch of options in the company I work for, which is currently privately held. Let's say the options have a strike price of 50 cents apiece and I have 100 (note - made up numbers!). Is it possible for me to excersize these options now, and place the private shares in a TFSA?

If so, what amount is used to calculate the contribution amount? Is it the price I spend (50 cents * 100 = $50) ? Or is it the FMV of the shares (currently I think it is said to be $1 / share)? If it is the FMV what documentation would I need to back that up?

How does one go about doing this anyway, with shares in a private company?
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
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Newbie
Aug 4, 2009
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simple answer - you can't hold private shares in a TFSA. Similar to an RRSP.
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jj-cfp wrote:
Aug 25th, 2009 10:50 am
simple answer - you can't hold private shares in a TFSA. Similar to an RRSP.
Is there any way to place such shares into a protected vehicle?
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
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jj-cfp wrote:
Aug 25th, 2009 10:50 am
simple answer - you can't hold private shares in a TFSA. Similar to an RRSP.
That's not true at all. Under self-directed RRSPs, you can invest into private company shares, even your own, subject to restrictions. The most common restriction is if you will own more than 50% of the shares invested in the Canadian controlled company, then you cannot use the RRSP as the conduit. However, from a 0-10% investment, there is no restriction, and from 20-50%, the restricted value for the whole family unit is $25,000. Most people don't actually use their RRSP to buy their company shares because they lose out on the $750,000 capital gains exemption.
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Cypherus21 wrote:
Aug 25th, 2009 1:42 pm
That's not true at all. Under self-directed RRSPs, you can invest into private company shares, even your own, subject to restrictions. The most common restriction is if you will own more than 50% of the shares invested in the Canadian controlled company, then you cannot use the RRSP as the conduit. However, from a 0-10% investment, there is no restriction, and from 20-50%, the restricted value for the whole family unit is $25,000. Most people don't actually use their RRSP to buy their company shares because they lose out on the $750,000 capital gains exemption.
My main goal is to try to purchase these shares now or in the near future at my option price, so that if/when they become worth more on the public market I won't have to pay all that capital gain, as the gain would be sheltered.
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
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Interesting discussion. My wife is in a similar position, holding options and warrants for a company that is still currently private. She has also signed up for the employee share purchase plan. I'm not sure why I hadn't really considered the idea of placing the shares within a TFSA or RRSP.

I suppose a TFSA is a better choice, as the taxation in an RRSP is only deffered and eventually taxed as income, while in a TFSA it is avoided completely.

Does anyone know exactly what is involved and who administers such an account. I noticed the following on the RBC Direct Investing commision fees schedule:
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brunes wrote:
Aug 25th, 2009 5:48 pm
My main goal is to try to purchase these shares now or in the near future at my option price, so that if/when they become worth more on the public market I won't have to pay all that capital gain, as the gain would be sheltered.

iTrade has a hefty set-up /annual fees - $400 set-up /security plus $100/year.

QT is as $250 set-up plus $50/year

Search for CCPC fees in registered accounts with your broker.
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bcbgboy13 wrote:
Aug 25th, 2009 6:04 pm
iTrade has a hefty set-up /annual fees - $400 set-up /security plus $100/year.

QT is as $250 set-up plus $50/year

Search for CCPC fees in registered accounts with your broker.
Hrm my RSP is at QT so I might explore them.

$250 + $100 / yr might be a drop in the bucket compared to potential savings.
To be nobody but yourself - in a world which is doing its best, night and day, to make you everybody else - means to fight the hardest battle which any human being can fight; and never stop fighting. -- E. E. Cummings
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Are they shares in a CCPC? I looked into this and from the bit of research and people I talked to - it is currently possible to put them into an RRSP, however, I was told (as of last April) it was not possible to put them into a TFSA (yet?).

If you hear otherwise about putting the shares into a TFSA I would love hear about it.
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I believe, if they're private company shares, that you actually have to apply for a special exemption from your local provincial securities commission, for the right to 'offer' those shares to your RRSP trustee, as such shares are not otherwise registered or offered under prospectus.

Basically, its a huge mess, and something you want to avoid if at all possible.
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