The CRA is Going After Day Traders Who Use Their TFSAs

FP | Jamie Golombek | Feb 16, 2023

Unlike an RRSP, a TFSA is not exempt from paying tax on business income from day trading

• In the past few years, active trading in a TFSA has been a focus area for the Canada Revenue Agency’s audit and reassessment activities, and the agency has been targeting taxpayers who actively trade securities in their TFSAs.
  • A tax case decided earlier this month involved a taxpayer who grew his TFSA to more than $617,000 from $15,000 in three years by actively trading penny stocks. The taxpayer, a Vancouver-based investment adviser, opened his first TFSA at the very beginning of the program’s launch on Jan. 2, 2009. It was a self-directed TFSA, and all securities purchased and sold by the TFSA were “qualified investments,” as stipulated by the Income Tax Act.

See:  Do employees pay less taxes by exercising stock options pre-IPO?

• The CRA considers a variety of factors when determining whether a taxpayer’s gains from securities constitute carrying on a business, including the frequency of the transactions, the duration of the holdings, the intention to acquire securities for resale at a profit, the nature and quantity of the securities, and the time spent on the activity.
• This rule is in direct contrast to the rules governing active trading in a registered retirement savings plan (RRSP) or registered retirement income fund (RRIF). The Income Tax Act has a specific rule that exempts both RRSPs and RRIFs from paying tax on business income when that income is derived from investing in qualified investments.

Continue to the full article –> here

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada’s Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org