# Tax Implication for Gifting shares subject to Cease Trade Order



## nortel'd (Mar 20, 2012)

I, and probably countless other small retail investors, hold CNTTQ (CANNTRUST HOLDINGS INC) shares that are subject to a Cease Trade Orders (CTO). However; if I would like to remove them from my list of holdings, I can apply to "gift" them to TD Direct Investing and they do not offer this service with the intention of attaining any value from the securities which are gifted to them.

My capital loss is small (under $1500 CD) so obtaining the services of a Tax Lawyer is out of the question. I do my own simple investing and simple book keeping and have never felt I required a financial advisor or Tax accountant.

CNTTQ is not bankrupt, it’s shares are almost worthless and I am not able to sell them. I can gift them to TD Direct Investing but TDDI will not issue any tax forms or transaction slips in connection with this type of transaction. I understand this statement to mean TDDI will not issue a T5008. 

My questions: 

1. If I gift my shares to TD Direct Investing, will they be deemed to have been disposed?
2. Will I be able to legally claim with the CRA a Capital Loss without a T5008?
3. If I can claim, how do I report the capital loss without the paperwork? 

Background....
In May 2019, I bought shares in CannTrust Holdings Inc. The company soon listed itself on the New York Stock Exchange, and shortly thereafter got caught growing more marijuana plants than their Health Canada license allowed at their Fenwick and Vaughan sites. Their grow licensees were revoked shortly thereafter.. The share price tanked and the company did not file an audited Financial Statement plus a number of other infractions. The company has had a cease trade order (CTO) issued against it since April 13, 2020.

Interestingly , the grow licenses have been reinstated at the Fenwick Facility (May 29, 2020) and Vaughan Manufacturing Facility (August 20, 2020) since the Cease Trade Order was implemented on April 13, 2020.

I sent an email to [email protected] asking when to expect that Cease Trade Order to be lifted so I could trade my CannTrust Holdings ... CNTTQ ... Their reply: 
_“As previously announced when CannTrust obtained its initial order under the Companies’ Creditors Arrangement Act (Canada) (“CCAA”), the Company has determined that it does not currently intend to devote additional time or money towards curing its public disclosure defaults by completing and resuming the filing of required reports under Canadian and United States securities laws. Upon completion of its CCAA process, and depending on the circumstances prevailing at that time, the Company may determine to resume devoting additional time and money towards curing its public disclosure defaults by completing and resuming the filing of required reports under Canadian and United States securities laws. However, there can be no assurance at this time that the Company will do so.
Holders of CannTrust securities are urged to consult with their own investment advisors or legal counsel about the implications of the Cease Trade Order.”_


My shares are listed as CNTTQ in my Canadian dollar trading account. Today, each share of CNTTQ is worth $0.26 US and I paid $7.52CD. On the advice of a TD Direct Investing representative, because of the CTO, it appears I am not able to sell then even if I were to move them to my US dollar trading account. But I can “GIFT” them to TD Direct Investing. Sadly, the representative was not able to tell me if I could claim the existing Capital Loss should I gift my shares.

The TD Direct Investing site also states:
It is the responsibility of me, the Client, to understand the tax implications (which I do not!) of this transaction and I should take professional advice as required..

Me the Client States:
HELP!


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## Eclectic12 (Oct 20, 2010)

My understanding is that yes, you have disposed of the shares (it is irrevocable, even if the CTO is lifted later).
Yes you can claim the CL without a T5008 from the CTO, just make sure you've got documentation to show CRA should they ask questions.

Not sure what you mean about "no documentation" as your monthly statement should show the shared being dropped from the account. I figure if one takes some print screens of the request to gift the shares and the monthly statement shows the shares disappearing from the account, that's sufficient. Reporting is the standard Schedule 3, Part 3 - the same as if a sale had taken place.

While I haven't done the gift business yet, I have reported a capital loss (CL) for worthless shares without a sale in the past. 








TaxTips.ca - Worthless Shares or Debt


TaxTips.ca - Worthless Shares or Debt - You may be able to claim a capital loss even though the investment cannot be sold.




www.taxtips.ca





At the moment, I have one company that I wrote off that has made a comeback. I'll have to report the full CG, if I sell.


Cheers


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## nortel'd (Mar 20, 2012)

Eclectic12 said:


> Not sure what you mean about "no documentation" as your monthly statement should show the shared being dropped from the account. I figure if one takes some print screens of the request to gift the shares and the monthly statement shows the shares disappearing from the account, that's sufficient. Reporting is the standard Schedule 3, Part 3 - the same as if a sale had taken place.


I was referring to the T5008 form being the required documentation. Thanks for suggesting the use of print screen shots. That never crossed my mind and I am now looking forward to declaring a Capital Loss.


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## Eclectic12 (Oct 20, 2010)

You are welcome.

As I have an online account with CRA plus use tax software, if it was me - I'd likely create a template return then import the forms CRA has. It wouldn't surprise me if CRA had a T5008 for the CTO stock despite the broker not providing one. I noticed the last time I did this that where the broker gives me a consolidated form, CRA had individual slips for each stock sold.

Regardless, the documentation we discussed should be plenty. Worst case, the broker can confirm the CTO transfer if CRA asks before the records are purged.


Cheers


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