Big TFSAs coming under taxman’s scrutiny

Woman frightened by taxesGarry Marr reports in Tuesday’s Financial Post that the Canada Revenue Agency (CRA) is targeting investors with big gains in their Tax Free Savings Accounts (TFSAs, the Canadian equivalent of America’s Roth plans).

Marr says the CRA is arguing that if investors use TFSAs for frequent trading and make large gains as a result, they are in effect running a trading business and should be taxed on any income so generated. A so-called TFSA audit program has been rolled out in recent years, according to the Post’s sources.

The CRA considers eight factors to determine whether the trading pattern constitutes a business; among them are frequency of transactions, period of ownership, securities knowledge, trading experience, advertising of the service and use of speculative securities.

Calgary-based law firm Moodys Gartner Tax Law LLP is said to be preparing for a legal fight with the government.




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