Canadian Money Forum banner

"High Flying" TFSAs being audited

16K views 40 replies 22 participants last post by  Teddy 
#1 ·
#2 ·
I read it this morning, but it can't come as a total surprise.

I definitely fall in the category below, so I have nothing to worry about. :)

"Anyone who has a highly valued TFSA because of a smart purchase of a legitimate publicly traded stock that went through the roof doesn’t need to worry either, Golombek says. “However, if it involved various issuances of private shares or illiquid securities, that’s when they should seek professional tax advice.”
 
#27 ·
So if you exceed that limit you pay tax, should you then be able to claim losses?

How about a clear firm limit on contributions, contribution valuation and that the investments must be arms length?
A big value of TFSAs and RRSPs is the invest and ignore taxes aspect.
 
#6 ·
That would be so difficult to enforce though. It would require some sort of a computer system and staff established to put those monitors into place. And then they would be fielding calls from people who say "My stocks grew 25% this year, but only 5% the next year - do I have to pay tax?"

I think they got it right. They basically identified the extreme examples through running a simple report, the 1% that most of us don't fall into. I don't think jamesbe has to worry.

If nothing else, this should be a reminder to all of us that the gov't is watching. Be careful with the schemes and shell games.
 
#8 ·
the high flyers did their flying in 2009. Their activities consisted mostly of tricky swapping based on the huge spreads between bids & asks for numerous securities in canadian markets. The cra stopped this practice within months; that is, they stopped it in 2009 by disallowing swapping into & out of tfsas.

it appears that the cra is finally getting around to auditing the tfsa accounts in question.

such accounts will present a distinct profile. They will be easy to find. Apparently the cra also wants to know if the trail leads to specific financial advisors.

for the record, i've never seen any sign or evidence that any party in cmf forum ever posted even a hint of the swapping strategy that was used ...
 
#16 ·
The article is vague ... and for some strange reason :rolleyes:, the law firm seems to think none of their clients could possibly have done anything wrong.

I'm not sure about what they are referring to but one "scam" that was documented was as follows.

Find a stock that one knows will be a large gainer - say a penny mining stock. The individual would contribute $100K to their TFSA, where $95K is an over-contribution and subject to the 1% per month penalty. They'd buy the stock then when the stock went up to say $400K, they would withdraw $395K and pay the accrued penalty.

If this took twelve months, the penalty would be around $12K but the following year, they could legally re-contribute the $395K withdrawal.

I put the scam in quotes as technically - it's all good but definitely goes against the intent.


Cheers
 
#13 ·
I remember reading about a few schemes to wedge private companies into TFSA's and have corporate income flow out tax free -- while substantially increasing your TFSA room the next yr. There were other plans afoot to exploit the tax free nature of TFSA withdrawals and the continually increasing contribution limits. Not unlike schemes to exploit art donations, software writeoffs or other manifestations of a promoters mind. I suspect these are what are being targeted. And the buy/sell spread wiggles on thinly traded stock.

Any genuine open market investing will be OK.
 
#17 ·
That's why I find so funny the part of the article that seems to be outrage:
How is it possible that the Canada Revenue Agency might launch tax audits on a vehicle that is supposedly free of tax encumberments?
With so many people thinking they have to stick to 1.5% to 2.0% savings and so many of the rest of us in the $3OK range, there can't be many with a TFSA large enough to bother reviewing!:D

I suspect Golombek's idea that of those with TFSAs, less than 1% are affected is too high a number. IMO, it's likely closer to 0.25% but without specifics, there's no good way to tell.


Cheers
 
#21 ·
I can see how it might come about for some.

Perhaps they held some de-listed stocks, moved them into the TFSA as there was no capital gains. And then the stock got rellisted, then they had value.

I know that if you have de-listed stocks the brokers will buy them off of you for 1c....perhaps and individual can do the same.

I am not sure if that is possible, just hypothesizing.
 
#24 ·
i remember lister. At the time he posted here in the forum about his big tfsa gain, he said it was a small VSE miner that he did not wish to identify.

for the record, a minor forum member who is a part-time troll attacked him at that time. However i for one believed lister. I believed he had legitimately made a fantastic buy in tfsa & i say congratulations, chapeaux.

(aside to lister) not sure i understand your question. Tentatively, it might be about choosing between early retirement or paying off the mortgage. Q: had you thought about selling the house, paying off the mortgage, downsizing to a smaller property, taking early retirement & keeping the tfsa intact, all more or less at the same time (?)
 
#33 ·
i remember lister. At the time he posted here in the forum about his big tfsa gain, he said it was a small VSE miner that he did not wish to identify.

for the record, a minor forum member who is a part-time troll attacked him at that time. However i for one believed lister. I believed he had legitimately made a fantastic buy in tfsa & i say congratulations, chapeaux.
I'm not going to let a troll sucker me into anything. Quite obvious what that twit was doing.

(aside to lister) not sure i understand your question. Tentatively, it might be about choosing between early retirement or paying off the mortgage. Q: had you thought about selling the house, paying off the mortgage, downsizing to a smaller property, taking early retirement & keeping the tfsa intact, all more or less at the same time (?)
I have a condo and it's already pretty small. I bought in an area that was pretty cheap at the time. Now it's a lot more expensive and I'm not interested in living in a different part of town that would be substantially cheaper.

It looks like I'm going to have to suck it up for yet another year, wait for the spouse to finally be employed and at that point evaluate leaving my job and industry for something else and taking the pay cut. That's assuming none of the problem issues have gone away. I really loathe the thought of cashing out the TFSA when the tantalizing prospect of financial independence looks to be possible.
 
#34 ·
No haven't received anything yet. Even if I did I wouldn't be worried. Everything I did was just simple stock purchasing, selling with some dividends and distributions thrown in and all documented with the broker. I don't even know what that stuff was mentioned in the article.
 
#38 ·
the way i see it in my mind's eye is a whole crowd of people all raising their hats at the same time, ie when writing to a group of people like this forum, i think of chapeaux as something akin to an exhortation. Let's all Congratulate this Winner !

& thank you, very glad we agree on the Real Deal.
 
#40 ·
Are there members or readers here who received audit questionaires from CRA?

I have a "high flying" TFSA account and have received a questionaire, but that article has brought my wife and I much fear of personal ruin.

I'd like to locate others who are under audit in order to find a potential sharing of legal costs.

I'm not personally a "high flyer" - just an honest man who's never been rich but now find I'm off-side despite TD Waterhouse's constant reassurance I was acting legitimately within CRA rules in my TFSA self directed brokerage account.
 
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top