Do you have contribution room, but no new money to contribute to your RRSP this year? Or perhaps there may be an opportunity for you to make a tax free transfer to an RRSP. Here are two tips that could make a difference for you this year.

No new money for RRSP contributions?

Here's good news: RRSP contributions may be made in cash or in kind. That is, a taxpayer may transfer an eligible investment from his non-registered accounts to his RRSP and may claim a deduction for the fair market value of the asset at the time of the transfer.

If the fair market value at the time of the transfer is higher than the cost of the asset to the taxpayer, then the taxpayer will have to report the capital gain (and any accrued income up to the date of transfer) in his income for the year. However, here's a tax trap: if the fair market value of the asset is less than the taxpayer's cost, then the loss will be deemed to be nil. That is, it will not be claimable.

Therefore, if the taxpayer wishes to place an asset, which has decreased in value, into his RRSP in order to create a tax deduction, it's best to sell the asset, then contribute the proceeds to his RRSP, thereby having the RRSP repurchase the asset. This method will allow the taxpayer to deduct the capital loss on his tax return.

Tax free transfers to an RRSP

The following capital sources may be transferred to the taxpayer's RRSP on a tax free basis over and above the normal RRSP contribution limits plus the $2000 allowable over contribution:

• Eligible Retiring Allowances. Amounts received on job termination as a severance package may be rolled over into an RRSP on a tax free basis depending on certain conditions. For service after 1995, no RRSP rollover is allowed. For service after 1988 and before 1996, a single limit of $2000 per year of service can be rolled into an RRSP. And for service before 1989, it is possible to roll over $2000 for each year of service plus another $1500 for each year in which the employer's contributions to the company pension plan did not vest in the employee. The eligible amount will be shown on the T4A from the former employer.
  
  
• Funds from another RRSP. A taxpayer may request a direct transfer of RRSP accumulations from one RRSP to another RRSP under which he is that annuitant. Form T2033 may be used to effect the transfer.
  
  
• Funds from a Spouse's RRSP. Upon the breakdown of a marriage or common-law relationship, where the terms of a separation or divorce agreement require that the funds from one spouse's RRSP be transferred to the other, the funds may be transferred tax free. Form T2220 must be used.
  
  
• RPP amounts. When a taxpayer ceases to belong to an RPP, the funds from the RPP be transferred to his RRSP. Form T2151 must be used.
  
  
• DPSP accumulations. A taxpayer may transfer funds from his DPSP to his RRSP. Form T2151 must be used.
  
  
• Foreign pension receipts. Lump sum amounts received from a foreign pension plan in respect of a period while the taxpayer was a non-resident may be transferred to the taxpayer's RRSP. Amounts that are exempt from tax under a tax treaty with the foreign country may not be transferred.