[MoneyGuy]

Originally Posted by darklord700

Correct me if I'm wrong, withdrawals from grants and growth are taxable, albeit in the hands of the beneficiary but contributions can be withdrew tax free.

Therefore, if your RESP investment is in a loss position, you would want to designate the losses as coming out from grants (there'll be no growth to speak off in this case).

Say, you have contribution of $2500 and grant of $500, you suffer a loss $500 and you want to withdraw $2500, what would you do?

My theory is you desginate the $2500 withdraw form contributions. If you designate say, $2000 from contributions and $500 from grants, you still have $500 that is taxable, am I right?

Originally Posted by Slava

I think so. It's really never happened in any account I have dealt with, so it's not something I have considered. I don't know if it work different than what you're saying here, just that I can't think of a single person who has been in that position with me.

As you note the money is taxable to the beneficiary as well, so the taxes are basically a non-factor because the beneficiary has tuition and other education deductions to put against it.

If growth is negative, withdrawals come out of the original capital. Grant amounts are not affected.

So, $500 goes back to the government, and the contributor can do a return of capital on anything that remains.

The same would apply if the account had grown $1,000 instead. The grant is returned to government and the return of capital and growth can be withdrawn (note that if growth is not transferred to an RRSP there is a 20-per-cent penalty on top of any taxes that may apply).

If there is a possibility of future contributions, my advice would be to pull out everything except the grant and see if it grows in the future.

Also, if there is negative growth over many years, you might consider firing your advisor. Just sayin'.