RE:RE:Over-contributions to TFSACAinPlap:
It is unfortunate that the “definition of advantage” fails to give any examples.
I relied -- in my decision – on the advice of a CRA rep with whom I spoke by telephone. I explained quite clearly the reason for my over-contribution, and emphasized my fears of (a) beheading and (b) a lengthy prison term. That was his opportunity – as a fellow human being – to speak up and warn me. Of course – perhaps he was speaking only as a CRA agent – one given to lamenting the rust accumulating on the blade of the departmental machine.
From a common sense perspective I foresee considerable problems with – just let’s take one example – the attempt to tax “Income and capital gains on certain property or transaction.”
In fact – I took no capital gain – nor was there any income. Nor – in the forms that I filled out – was there any question relating to those possibilities! You would think that there would be very specific questions relating to the “definition of advantage” – but there were not.
But for fun – let us assume that I took a capital gain on my warrants – selling them for 19 cents at the end of December. That gain would be taxable if the warrants had remained in my margin account – thus it could be argued that my over-contribution was the direct cause of a tax saving. That saving could not be determined until Aprilish at the earliest – because you would have to compare a theoretical tax payable arising from a gain in my margin account with the lack of tax in the TFSA account. Only the difference between those two amounts could be considered an advantage arising from the over-contribution.
And that tax might well be non-existent if I had no taxable income or an accrued amount of capital losses. If it were argued that any accrued capital losses should be reduced by a theoretical gain – then there would still be no tax immediately payable. The penalty would be an undeterminable amount in the future.
I have absolutely no expertise in tax matters – and my mind tends to glaze over when confronted with numbers. Perhaps there is some way of getting the CRA to explain what they mean – but I would not be a good candidate to understand the explanation.