Court rules income earned from day trading in TFSA is taxable

A British Columbia judge has ruled that an investor who was day trading stocks in his tax-free savings account must pay tax on the income, opening the door to hefty tax bills for other frequent investors.

Fareed Ahamed, a licensed investment adviser and the plaintiff in the case, argued that because the Canada Revenue Agency exempts business income from day trading when it is done in a registered retirement savings plan, it should also exempt business income accumulated inside a TFSA.“Parliament could have adopted, but chose not to adopt, the same statutory approach for TFSAs as it did for RRSPs and RRIFs,” Justice Shapiro wrote in his decision.

He filed the case in 2015 after the CRA began auditing a number of tax-free savings accounts. Between 2009 and 2017, the agency assessed approximately $114-million in taxes from those audits, with about 10 per cent from TFSA accounts that were seen as carrying on a business – such as day trading, which can generate hefty returns through aggressive securities trading.

By 2012, the total value of the account had dropped to $564,482.90. Mr. Ahamed sold the securities and transferred the majority of the funds out of the TFSA. The CRA reassessed his tax owing for 2009 through 2012. Jamie Golombek, the managing director of tax and estate planning with CIBC Private Wealth Management, says it is no longer unusual to see six-figure balances in TFSAs – and while it may be a red flag for the CRA, the average investor need not worry.

While the TFSA trust occupied Mr. Ahamed’s time, attention and labour, Mr. Clarke acknowledged, it did not meet a number of the CRA tests, he argued, and the court should have found that the TFSA did not carry on a business.

What is the point they created TFSA..? Doesn’t make sense to charge us right now

Court rules government can commit fraud.

Hmm I don’t like this one bit

Who told the CRA he made money in TFSA? Banks reporting account balances to Government?

Losses made in TFSA last year should be tax deductible

They better let me claim my 20k loss on SPY calls from last year as well… And they are so vague in what constitutes “business earnings” So if I have a full time job, and make a couple profitable trades they’re going to come after me to

It is legal to play, just not to win.

So much for anyone getting ahead financially….. The government doesn’t have any right to that money….they didn’t do anything for it.

Liberal Gov can’t stand TFSA mostly because it was introduced by PC government and is a successful program to promote savings. This ruling must be overturned

They never wanted the middle class, making a lot of money off of hyper inflation, and they certainly don’t want them to have that money when the real estate dip happens

It seems TFSA is Totally fraudulent Saving Account

No financial prosperity allowed for the plebs

Canada is a horrible place. This is so bad Tax free / not tax free. Screw Canada

Why?

Can someone tell me in TFSA if I buy one week out covered calls but close them out in two days will that be considered short term trading as well?

They need to rename it to TTFSA (Taxable Tax Free Savings Account)

Fck this government for going after the little guys. No one is getting rich with their TFSAs. The one percent aren't gaming their TFSAs to get rich, yet the CRA never bothers to audit them.

Not fair

wow plot twist ugh that just takes the entire fun out of investing in the TFSA

This country is a complete joke. They try to drain the income of every citizen in any way they can. Tax everything. Moving to the US is a much better option

More money to be Laundered for Ukraine?

Shouldn't capital gains on principal residence lso be taxable?

Well that is a wrong decision. You can’t start changing the rules now

It’s all scam ..RRSP , TFSA …you can’t ever win ..

It’s always been considered that operating a ‘business’ out of a TFSA was taxable, but that the frequency and size of the transactions would be what determines if it’s a business… if you adjust your portfolio or buy an option once a day, is that really a day trading business?

Imma about to put this man in the rear view mirror! Got 250k, in my T-F-S-A, and I did it the right way, unlike Mr Ah-meyyy! No day trading, no options just buy and hold, my baby came through. Got lotsa dry powder for the recession could be some good sales on prime assets soon...

This was always a thing. CRA has been ambiguous wrt frequency that constitutes daytrading. Waste of courts time. Daytrading is taxable income and should be done in a margin account. Anyone doing well should be on margin and no money is returned from losses in TFSAs.

That’s bullshit

Am I allowed to sell cover CALLs on Bitcoin ETF on my TFSA? OptionsTrading

Lol wtf

What constitutes day trading legally?

It’s a Tax free savings . You can only contribute a little bit and you are trying to make it grow . So tax free doesn’t mean tax free.

Bullshit court ruling

Yearly primary residence flip good though

Then we are truly lost. The clue is in the name - if that is not the case, then change it and define the parameters. Don’t leave it to the whim of some Ill informed judge whose decision can be cited against savvy amateur investors TFSA investors are just trying to get ahead

Booooo

Lmao. What does TFSA stand for again JustinTrudeau ? 🤦‍♂️

But if you yolo all 88k on a stock and it goes to zero.. no capital losses. Thanks for playing!

TAX FREEish Saving Accounts just sound stupid

Gov, what a joke

ReplyGPT

ExplainThisBob

So much for tax free savings account TFSA and start calling is a Tax savings account TSA or non registered account…

There can't be grey areas with this. Clear definitions of what will result in being taxed. If it's number of trades, frequency or dollar amount. If it's only day trading then as long as you don't close your position same day as opening are you good.

Tax Free Savings Account. Not Tax Free Day Trading Account. Day Trading is NOT Savings, and any person with financial knowledge knows trading is not Savings.

That doesn't make any sense, the entire foundation of the TFSA is the idea that it is TAX FREE.

They hate the TFSA because of Harper.

This will only drive more investors into real-estate.

Why call it a TFSA then? Call it a TSA just like the rest of the GICs,RSPs.

This is beyond disgusting to me. Tax Free Savings Accounts are going to be taxed now? What is the point of calling it a TFSA our government is crooked and a liar. The Canadian government rapes people for a living. And they wonder why no one trusts them anymore.

This is unreal. ANOTHER kick in the ass from our govt. So even though we take on ALL risk investing, and spend the time learning how to trade in the markets. Tax the $75M lotto-max winners like they do in the USA if u looking for more revenue and leave hardworking people alone.

Wtf

This all happened before the Liberals were elected into power. The laws for TFSA's were put into place by the previous Conservative government.

tax free savings account taxable 🤡🌎

Because the judiciary are part of the same public sector junta that keeps needing more money...

Income tax, HST, property tax, gas tax, wine tax, cigarettes tax, provincial land transfer tax, municipal land transfer tax, traffic tickets, parking tickets, capital gain tax, liberal must go! Public sector employee balloon 32% in 2 years and cost taxpayers $30B.

Can you write it off as tax loss if you lose money then?! 🤔 Hypocrisy

Only the liberals would call something a ‘tax free savings account’ and then tax you 😂 Jokers these guys are!!!

Time to vote out the Liberals

PierrePoilievre if you and your party come into power are you going to make sure TFSAs are indeed tax free?

Has the CRA ever took the time to investigate any politician?

What? This is completely different from how every Canadian thinks TFSA works. It's time for some tax protests

So gains in Tax-Free Saving Acct are taxable? Ok then.

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