Tax Free Savings Account -Go open one!!

[Reef_Geek]

Originally Posted by Reef Pilot

Yes. Let's say that now you have 25.5K available in your new TFSA. You open up a trading account, and buy a stock for 20K. You were really lucky, and it doubles. Now you have 45.5K tax free room in you TFSA.

Of course, it can go the other way, too. If your 20K stock buy turned into a 10K sell, your TFSA room just dropped down to 15.5K.

Bear with me here, I'm a bit slow.

Scenario 1. TFSA contribution room is $25.5K, and I put $20K into stocks under TFSA status. Got lucky and stocks now worth $45.5K.

1) My understanding is that I still have $5.5K of contribution allowed since I did not make use of it all to begin with. Correct?

2) My understanding is that, within the account, I can still churn the holdings without counting it against my contribution room. So for example, within the account total value of $45.5K, I can sell $5K of stock X, where the sales goes into cash holdings that stays within the account, and use that cash to buy $5K of stock Y, all without the government fining me for over-contribution. Is this correct?

Scenario 2. TFSA contribution room is $25.5K, and I put $20K into stocks under TFSA status. Got unlucky and stocks now worth $10K.

1) My understanding is that I still only have $5.5K of contribution allowed since I did not make use of it all to begin with. The depreciation of $10K in value does not add any incremental contribution room (ie doesn't mean I can add another $10K due to depreciation, just that if I actually sell and withdraw $10K, then I can re-use that room). Correct?