The self-directed TFSA of a professional investment advisor, which actively traded qualified investments (mostly, penny stocks listed on the TSX Venture Exchange), was assessed under s. 146.2(6) for its 2009 to 2012 taxation years (during which $15,000 in contributions grew to $564,483) on the basis that its net gains were income from carrying on a business.
The TFSA noted that s. 146(4)(b) effectively exempted from Part I tax any income earned by an RRSP from carrying on a business of trading qualified investments, and submitted that “there would have been no rational legislative purpose for Parliament to tax a TFSA trust carrying on a business of trading qualified investments while exempting an RRSP carrying on the very same business” (para. 22).
In dismissing the TFSA’s appeal, Spiro J stated (at paras. 72, 79-80, 81):
[S]ubsection 146.2(6) incorporates by reference the well-established judicial test for
“carrying on business”. The nature of that test would have been abundantly clear when Parliament passed subsection 146.2(6) of the Act in 2008 and included it as part of the TFSA regime. …So long as the business is one that may be
“carried on”(i.e., not an“adventure in the nature of trade”) all businesses — without statutory exception — fall within the scope of subsection 146.2(6) of the Act, including a business of trading qualified investments.Had one of Parliament’s purposes been to extend the scope of the tax exemption to TFSA trusts carrying on a business of trading qualified investments, Parliament would have said so. It had already done so in the context of a different statutory scheme when it amended the RRSP legislation in 1993 to make such an exception for RRSPs. …
As directed by Mr. Ahamed, the Appellant traded frequently, had an extensive history of buying and selling shares that were mostly speculative in nature, and owned the shares for short periods. In light of Mr. Ahamed’s knowledge and experience in the securities market as a professional investment advisor, and the considerable time he spent researching securities markets, there can be no doubt that the Appellant carried on a business of trading qualified investments for each of the taxation years at issue.