CRA has opined that all TFSAs, RRSPs, RRIFs, RESPs, and RDSPs are resident in Canada.


In a March 22, 2018 Technical Interpretation (2018-0738201I7, Pietrow, Victor), CRA opined that all TFSAs are resident in Canada. Similarly, CRA opined that all RRSPsRRIFsRESPs and RDSPs are resident in Canada. They base this conclusion on the responsibilities of the trustee (e.g. the financial institution) under the terms of a trust required in order to be an eligible TFSA. These generally relate to monitoring and administering the trust to ensure compliance with the requirements of a TFSA.

The question was posed in the context of a self-directed TFSA which was reassessed on the basis it was carrying on a securities trading business. The TFSA holder was a non-resident of Canada for at least part of the period under audit. She argued that, as she made all the investment decisions, mind and management of the TFSA trust was outside Canada, making it non-resident and, therefore, the TFSA trust was not taxable in Canada on any business income earned during that period.

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 446.

Rectification - Not Dead Yet? - Rectification to reduce an excess capital dividend (due to a computation error) was allowed as the intention to exhaust the CDA was clear from the start.


In an August 22, 2018 Supreme Court of British Columbia case (5551928 Manitoba Ltd., 2018 BCSC 1482, S1711670), the taxpayer petitioned the Court to rectify a capital dividend to reduce it by $184,880 such that the 60% Part III Tax on the excess capital dividend would be eliminated. In the event rectification was denied, the taxpayer petitioned that the dividend be rescinded. The taxpayer preferred rectification, however, as a rescission may open up other tax liabilities. The Attorney General of Canada opposed the rectification but not the rescission.

The corporation sold business assets, after which the directors sought to distribute the maximum amount of capital dividends possible. The corporation engaged third party accountants to advise on the calculation of available capital dividend. The accountants made an error in their analysis and, therefore, provided a capital dividend account calculation much higher than was actually available. As a result, an excessive capital dividend was declared.

Taxpayer wins
The Court found that there was a definite and ascertainable agreement between the directors to effectively “clean-out” the corporation’s capital dividend account, which would allow the corporation to pay the amounts out tax-free to the shareholders. The corporation’s intention was clear when seeking out the advice of the accountants and when passing the Resolutions. The only error was in the figure provided by the third-party experts.

In contrasting to the Supreme Court of Canada decision in the Fairmont case (Docket: 36606VTN 426(10)), the Court noted that:

  • there was no “bold tax planning” – the directors were simply seeking to empty the capital dividend account, to which they were entitled;

  • the corporation was not seeking to modify the instrument due to an unplanned tax liability – the agreement at the outset was to issue a tax-free dividend;

  • there was no suggestion that the corporation was recklessfailed to act with due diligence, or should have known – the directors engaged third-party experts to assist with the computation, given the complexity of the calculation;

  • there was not an error in judgment; and

  • the rectification did not require the Court to wholly rewrite or unwind a complex mechanism or series of transactions, rather the corporation wished to replace the incorrect figure with the correct one.

The Court further stated that rescission would have been granted if it were to rule on that matter (though it was not required as it allowed the rectification).

Editors’ Comment
The taxpayer’s error related to the timing of the addition to the capital dividend account on the disposition of eligible capital property, an issue which no longer exists due to the transition of eligible capital property to Class 14.1 effective January 1, 2017.

If rectification had not been granted, but rescission had, there may be a risk that the rescinded dividend would result in a shareholder benefit.

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 446.

Life in the Tax Lane - February 2019

This FREE 10-minute video for Canadian Tax Professionals includes rapid-fire discussion of select recent developments in the wonderful world of Canadian tax presented by the Video Tax News Team. 


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Did you know… A typical estate freeze may cause corporate attribution to apply. For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 445.

Where an individual taxpayer transfers or loans property to a corporation, directly or indirectly, the transferor may be deemed to receive annual income (Subsection 74.4(2)) at the prescribed rate going forward (Regulation 4301(c)). The deemed income will fluctuate with the prescribed rate – the rate is not locked in at the time of transfer.

This applies if one of the main purposes of the transfer or loan was to reduce the person’s income and to benefit a designated person (which includes an individual’s spouse or common-law partner, a non-arm’s length person who is under 18 (such as a minor child), and a niece or nephew under age 18).

One situation where this may apply is in an estate freeze where an individual converts the value of the company into fixed value preferred shares and allows a designated person to acquire common shares. The exchange of common shares for preferred shares is a transfer of property and can, therefore, result in the deemed income described above applying to the preferred shares. Note that the designated person may hold shares directly or indirectly, so shares held by a trust in which one or more beneficiaries are designated persons can result in the application of corporate attribution.

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 446.

Home Buyers Plan - Acquisition of a partial interest in a home is sufficient to qualify for the home buyers plan.


In an April 30, 2018 Technical Interpretation (2017-0730991E5, Doiron, Wayne), CRA was asked whether a married couple who each acquired a partial interest in a home, with the original owner retaining an interest, would qualfy for an HBP withdrawal.

CRA confirmed that joint ownership is sufficient to permit participation in the HBP. In addition, either legal ownership or beneficial ownership would be sufficient, so it is not essential that the individual’s name be on title. CRA noted that an agreement in writing to acquire the home would be required under the HBP criteria (Section 146.01).

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 444.