tag:blogger.com,1999:blog-5465015914589377788.post320090759196018368..comments2024-02-17T11:07:06.232-05:00Comments on Michael James on Money: TFSA AbuseMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-5465015914589377788.post-56846511201711333092009-10-29T14:30:36.065-04:002009-10-29T14:30:36.065-04:00very clear explanation. I finally understand it.very clear explanation. I finally understand it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-69891282150977710572009-10-28T23:04:45.047-04:002009-10-28T23:04:45.047-04:00Fred: I agree that finding something with much mor...Fred: I agree that finding something with much more volatility (like options) would be more effective than the basic strategy I described.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-25894738289668219852009-10-28T23:01:10.932-04:002009-10-28T23:01:10.932-04:00i bet there were more sophisticated strategies tha...i bet there were more sophisticated strategies that investors were using that worried the government. Swapping options makes the most sense to me. You can substantially hedge the risk by buying an equal number of puts and calls and putting them in a RRSP, and putting an equal number of puts and calls in the TFSA. Because of the time value of options, they are by definition volatile day-to-day. When the puts are in the money, you swap the puts to the RRSP for cash. As soon as you have swapped tax-free a few thousand dollars from your RRSP to TFSA, you liquidate your call and put positions.Frednoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-76729423433701317002009-10-22T09:45:50.326-04:002009-10-22T09:45:50.326-04:00ChrisR: Your idea falls into the category of doing...ChrisR: Your idea falls into the category of doing a swap for a value different from true fair market value. Obviously the bond is worth more just before making a payment, but if it can be traded for its initial value, then you can get an advantage. You may be right that clever people could find ways of doing swaps at prices different from fair market value.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-30062013917807061742009-10-22T02:40:19.227-04:002009-10-22T02:40:19.227-04:00I don't think that market timing would be nece...I don't think that market timing would be necessary if the loophole was left open.<br /><br />Let's say Tammy decides to invest her 100000 RSP into 20 different bonds that each make their payments on different dates (5000 into each bond). She could then "swap" each of the bonds into her TFSA just before the payment date, so that she never has to pay tax on the income generated.ChrisRnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-19747481844611025242009-10-22T02:18:01.219-04:002009-10-22T02:18:01.219-04:00Well, these are amazing ways for tax avoidance. No...Well, these are amazing ways for tax avoidance. Now, i have understood the basic concept of swapping.washington mutual online bankinghttp://savingsaccounts411.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-38458119546100312672009-10-21T21:44:49.316-04:002009-10-21T21:44:49.316-04:00Michael - I think you're right. This is just ...Michael - I think you're right. This is just another way of trying to get big returns with market timing, and if you could do that, you wouldn't need this trick!Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-88107376223570471752009-10-21T13:45:50.214-04:002009-10-21T13:45:50.214-04:00CC: Good point. Another concern I had when I firs...CC: Good point. Another concern I had when I first heard about this is whether one could find a stock that is so cooperative, and if so, why not buy low and sell high to make even more money? One concern for buying and selling as you describe is getting hit with spread losses in addition to commissions.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-81656307042518032622009-10-21T13:29:26.191-04:002009-10-21T13:29:26.191-04:00I'm not sure what exactly a ban on swaps seeks...I'm not sure what exactly a ban on swaps seeks to accomplish. In the example in your post, what stops Tammy from buying and selling (instead of swapping) ABC in her RRSP and TFSA accounts to accomplish the same thing?Canadian Capitalisthttps://www.blogger.com/profile/06309785945698951870noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-16460167805359837312009-10-21T11:02:32.001-04:002009-10-21T11:02:32.001-04:00"Tax avoidance is all fun and games until you..."Tax avoidance is all fun and games until your money gets confiscated."<br /><br />Oh man, that's classic.<br /><br />Anyway, that is a damn clever scheme. I wonder exactly what kinds of swaps are still allowed?Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.com