I opened my $5,000 TFSA account with one of the banks in January. The interest paid started out at 4% and is now reduced to about 1%. I do not know where to invest to get the best rates. Could you please give me a few great options from which to choose? One of your readers wrote the following, which I thought was rather amazing: "After making a $5,000 contribution to my TFSA this spring, I have managed build it to $12,000." Thank you. - Norma T.
 

Obviously, our reader did not build $5,000 into $12,000 by putting his money into a savings account or a GIC. Although he did not tell us how he managed to more than double his TFSA assets in a few months, he probably opened a self-directed plan and invested in stocks when the market was down. He didn't have to buy penny mining stocks to do it. An investment of $5,000 in Bank of Montreal shares on Feb. 24 would have been worth $11,350 in early August, not including dividends. There are many other examples of blue-chip stocks more than doubling in that period.

Of course, there is more risk in investing in the stock market. Each person has to decide whether they are willing to accept that. If you want to stick with low-risk, interest-bearing investments, the best rates are usually offered by smaller financial institutions. But a word of warning: before you decide to move your TFSA somewhere else for a slightly higher return, ask whether any transfer or account closing fees will be charged. They would probably exceed any additional interest you would earn for the next year. And don't expect to double your money any time soon by sticking with a savings account or GIC. - G.P.
 

I transferred 600 trust fund units valued at $5,000 to my TFSA from a non-registered account. They increased slightly in value and I sold them recently at a considerable loss from my original purchase. Can I still use this capital loss against my capital gains in the non-registered account it was transferred from when filling out my tax return? - Bryan N.
 

It sounds like you have made a classic and costly mistake, one which I warned against in my book Tax-Free Savings Accounts. Based on your question, it appears that your units were already in a loss position before you moved them to the TFSA. In that case, you lost the right to claim a capital loss when you transferred them.

With TFSAs, as with RRSPs, the rules are that when an asset is transferred into a plan from a non-registered account it is deemed to have been sold for tax purposes. Any capital gain is taxable and must be declared on your next return. But, and here is the kicker, capital losses are not recognized in this situation and cannot be claimed. You should have sold the shares instead of transferring them and deposited the proceeds in the TFSA. That would have crystallized the loss for tax purposes. There is nothing you can do now, unfortunately. - G.P.
 

How does survivorship affect the TFSA, if you include children and spouse as beneficiaries in the TFSA account or through a will? Are there any probate fees to be paid? - Philip L.
 

Succession laws are governed by the provinces so the situation will depend on where you live. However, in all provinces except Quebec you can now designate a spouse/partner as a successor account holder, which you should do. This ensures the assets in a TFSA will pass to the spouse/partner without having to wait for the estate to be settled and with no probate fees. Do not designate your spouse and children as joint beneficiaries as that could create some legal problems. - G.P.
 

I understand that U.S. securities are subject to a 15% withholding tax
on their dividends to Canadian citizens if the securities are not held in an RRSP. Will they qualify for the same tax treatment if held in a TSFA? I can find no information on this. - Martin H. 
 

No. TFSAs are not covered by the Canada-U.S. Tax Treaty, which deals with such issues. Nor are they likely to be in the future as they are not technically "retirement savings plans". The bottom line is that any tax withheld from U.S. dividends paid to TFSAs will be lost. In this specific instance, TFSAs are not "tax-free". - G.P.
 

I have Nortel shares in my RRSP. Now that it is delisted can I claim it as capital loss and offset it with the gain when I sell other shares also within my RRSP account? - Carrie L., Ontario
 

No. Capital losses within an RRSP cannot be claimed for tax purposes. The good news is that any capital gains you earn on your other stocks won't be taxed either. - G.P.
 

Do you have any recommendations on a dividend fund with high preferred share content? - Norman G., Christina Lake BC
 

If you are not looking for a dedicated preferred share fund, the BMO Guardian Monthly Dividend Fund (formerly the GGOF Monthly Dividend Fund) is the best choice. It holds at least half its portfolio in preferreds although right now the percentage is much higher, at 68.3%.

For a fund that invests exclusively in preferred shares, consider the Claymore S&P/TSX CDN Preferred Share ETF which trades on the TSX under the symbol CPD. It tracks the performance of the index it is named after which is heavily weighted (84%) to financial issues. Almost 60% of the portfolio is in top-rated preferreds (Pfd-1). The fund currently pays quarterly distributions of 21c a unit for a yield of 5%. - G.P.
 

What are floating rate preferred shares? How are they priced? Do you have examples? - Nizar D.
 

Floating rate preferreds have adjustable dividend rates that are tied to some benchmark such as prime or the Canada bond rate. They trade on the TSX and are priced so as to generate a yield that is comparable to that of similar securities. An example would be the Brookfield Asset Management Class A Series 4 Preferreds which trade under the symbol BAM.PR.C. The dividend rate is 70% of prime. The current dividend works out to 39c annually and the shares yield 3%. When prime increases, so will the payout. - G.P.
 

I plan to move my RRSP account of $180,000 from a money market fund. I would like to buy the Beutel Goodman Income Fund for my fixed income portion. I would like to stay with the same company to make it easier. If I purchase Beutel Goodman Canadian Equity Fund and their American Equity Fund, would this allow proper diversification? Should this transfer be carried out in stages? Thanks for any input. - B.O'H.
 

I can't offer personal investment advice in this column. What I can say is that Beutel Goodman is a highly respected money manager and the company takes a conservative approach in its investing strategy. The funds you mention all receive a top $$$$ rating in my On-Line Buyer's Guide to Mutual Funds. However, I would note that you would not have any international exposure in your portfolio if you only selected the three mentioned funds. You may wish to correct that. As for timing, you would need to decide that in consultation with your financial advisor. - G.P.
 

I have shares in a company that I want to invest in a TFSA. How can I do this and keep the shares as they are without selling them? - R.M.
 

If you have a self-directed TFSA, you can put the shares directly into the plan up to a market value of $5,000. This is called a contribution in kind and your advisor can arrange it for you. Sometimes there is a small fee involved, so ask.

If you have made a profit on the shares, the contribution will trigger a taxable capital gain which you must declare when you file your 2009 return. Do not contribute the shares if they have lost money. The Canada Revenue Agency will not recognize a capital loss in that case. - G.P.
 

I expect to be laid off in the next two to three months. I have been working to pay off my line of credit and so don't have any cash on hand. If I cannot find a job prior to going through my lay-off package, which I expect will be eight or nine weeks of pay and have to cash in some RRSPs, which should I sell first? I keep a mixture of 45% equity mutual funds, 35% income funds, and 20% money market funds. I am 48 years old and have a mortgage. - Name and initials withheld by request
 

The money market funds would be my first choice. They are paying virtually nothing at this time because of low interest rates. You might as well cash them in if you need income to tide you over.

If possible, I suggest you wait until after Jan. 1 to make the RRSP withdrawal because your tax rate will be lower in 2010 if you are still unemployed at that time. - G.P.