PrefBlog

Here’s some food for thought regarding aggressive registered plan strategies:

The taxpayer in Louie appealed the CRA’s assessment of the advantage tax for 2009, as well as further assessments for 2010 and 2012. In 2009, Louie engaged in a series of 71 “swap” transactions that the CRA claimed contravened the advantage rules governing TFSAs.

The strategy involved Louie, an investor with sophisticated knowledge of the market, swapping shares between her TFSA and either her RRSP or a Canadian trading account for property of equal value. For swap transactions, her direct brokerage permitted trades of shares at any price selected between the day’s trading high and low.

By strategically selecting the price and timing of when Louie swapped shares between her TFSA and her RRSP or trading account, she was able to grow her TFSA from an initial contribution amount of $5,000 to about $207,000 in 2009.
…
In the Tax Court’s decision, released Nov. 16, 2018, Associate Chief Justice Lucie Lamarre first dismissed Louie’s appeal of the advantage tax for 2009, determining that the swap transactions “had an avoidance purpose,” pointing out that Louie’s RRSP and trading account were “consistently on the bad end” of the swaps: “I thus conclude that the series of swap transactions would never have occurred if the parties [controlling the RRSP and trading account] had been dealing at arm’s length and were acting prudently, knowledgeably and willingly.”

However, Justice Lamarre up- held Louie’s appeal of the CRA’s assessment for the 2010 and 2012 taxation years. The ruling suggested that the CRA was, in effect, reaching too far. The increase in value of shares held in Louie’s TFSA associated with these two taxation years was attributable to market forces and was neither a direct nor an indirect consequence of the swap transactions, Lamarre decided. That Louie suffered a loss in 2011 was further evidence of this.

This entry was posted on Tuesday, January 22nd, 2019 at 9:50 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.