Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Status of TFSA audit project
Position: Provided update and referred to S3-F10-C1 for guidance on whether securities trading in a TFSA constitutes carrying on a business.
Author: Wurtele, Dave
STEP CRA Roundtable – June 13, 2017
Question 13: TFSA audit project
Subsection 146.2(6) of the Income Tax Act provides that if a TFSA “carries on one or more businesses” then Part I tax is payable on its business income. We are aware that this has been a focus for CRA audit and reassessment activities targeting taxpayers who actively traded securities in their TFSA. Can the CRA provide an update on the result and its future intention on its activities in respect of this area? Also, does the CRA have any plans to educate the public on what the acceptable limits are on securities trading to prevent a TFSA account from being considered to be carrying on a business?
The CRA is committed to maintaining a compliance presence on high risk TFSA transactions to ensure that the provisions of the Income Tax Act are respected. To date, the CRA has reassessed more than $75 million in additional taxes resulting from audits of TFSAs.
In 2016, the CRA released Income Tax Folio S3-F10-C1 Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs and TFSAs, which provides information on the tax consequences of a registered plan carrying on a securities trading business. In the Folio it is explained that the determination of whether a particular taxpayer carries on a business is a question of fact that can only be determined following a review of the taxpayer’s particular circumstances. Interpretation Bulletin IT-479R, Transactions in Securities sets out factors developed by the courts that are relevant in determining whether transactions in securities constitute carrying on a business. There is nothing unique to TFSAs when determining whether transactions in securities constitute carrying on a business.
Offshore and Aggressive Tax Planning Directorate
Income Tax Rulings Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.
© Her Majesty the Queen in Right of Canada, 2017
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2017
For additional commentary on Technical Interpretations, court cases, government releases, and conference materials in a single practical document specifically geared toward owner-managed businesses, see Video Tax News Monthly Tax Update newsletter.
This effective summary and flagging tool is the most efficient way to ensure that you, your firm, and clients are fully supported and armed for whatever challenges are thrown your way.
Packages start at $399/year.