Those interested might want to read the original source, IIAC Letter to Finance and CRA re “Carrying on a Business” and Borrowing Within TFSAs (PDF) which covers a series of letters on the matter.Garry Marr wrote:The CRA is also hitting investors with audits if they trade too frequently for the agency’s comfort. The CRA has argued that investors who use their TFSAs for frequent trading and earn large gains are effectively running a trading business, and should be taxed on income.
The sudden growth in CRA scrutiny has triggered concern from the Investment Industry Association of Canada, which recently complained of “insufficient guidelines” for TFSA investors to determine whether they’ve run afoul of tax rules, in a letter to the Finance Department and the director general of the Canada Revenue Agency (CRA).
I'm not an accountant, nor a frequent trader, but from my read of these articles/letters, the underlying issue that might be of interest to FWF'ers is (I've added the link to IT-479R):
IIAC wrote:Since IT-479R, Transactions in Securities, was issued in 1984, there have been significant changes in the financial marketplace including major drops in interest rates, advances in technology allowing for self-service options, and greater taxpayer financial literacy, which has meant that more people buy and sell more frequently from a wider range of investments in the capital markets than before. We recognize that any CRA decision on whether or not a business has been carried on will be based on the facts of a particular taxpayer situation, however, is there information available currently for Canadian taxpayers that would speak to the risks, from a tax perspective, that frequent trading, investment in non-dividend-paying securities, etc. could lead to? We feel a need for clients to have access to plain-language guidance on what is being considered by the CRA to be carrying on business.