Where a trust ceases to be a TFSA pursuant to s. 146.2(5)(c), so that s. 146.2(8) deems the trust to have disposed of all its properties at fair market value proceeds, would this deemed disposition be considered to be a distribution under variable C of the definition of excess TFSA amount and variable B of the definition unused TFSA contribution room in s. 207.01(1), so that the amount would be added back to the taxpayer’s TFSA contribution room in the following year? CRA stated:
Where a TFSA trust disposes of property for fair market value proceeds, the transaction would not constitute a distribution under the TFSA since the holder has received nothing in satisfaction of their interest in the arrangement. …
Accordingly, the de-registration of an individual’s TFSA would cause a permanent loss of TFSA savings room for the individual.