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tfsa over-contributions: how would the penalty apply in this scenario?
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first, if your stock is trading at $1 and you transfer the 5000 shares in-kind to your tfsa on august 2, 2011, you are deemed to have disbursed that stock in your (assumed) non-registered account. this may have tax consequences depending on the acb of the original purchase. as for your tfsa overcontribution, you will only have to pay the 1% monthly penalty on the value of the overcontribution, i.e. $5000. you will pay 1%/month for each month the overcontribution exists, regardless of what the value of the overcontributed assets end up being. thus, you'll pay a $250 penalty for an overcontribution life of 5 months. the stock price could go to $2 or $0, but you'll pay a fixed tax of $250 for the value of the initial overcontribution. see these articles at the cra website for more information:tax payable on excess tfsa amount and examples - tax payable on excess tfsa amount.
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