The Canada Revenue Agency recently confirmed their concern about non-passive investments in TFSAs. When might this be an issue?
The Canada Revenue Agency’s position is that if a TFSA is being used for an investment business the gains will not be tax free. The CRA has indicated that they are reviewing TFSAs as part of their audit and assessment activities. The primary criteria seems to be the amount of gains in the TFSA. If the CRA considers the activity to be a business they will tax the gain as business income. The CRA has already secured significant revenue through these efforts.
The capital gains rate is not available to business income generated in a TFSA. The tax consequences could be significant. It is important to be clear about whether this issue could apply to a client. The Tax Foresight Securities Trading classifier can help with this determination. It applies existing case law on when courts consider investment activity a business. This is then used to predict whether the scenario entered will be a capital gain or business income. If it would generally be a capital gain the tax free status of a TFSA is available.
Want to make sure you are considering all the new securities trading cases when you give your advice? Tax Foresight reflects the newest case law and takes every case into account when providing its prediction.
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