|
Federal Tax - TFSA Trusts. Canadian Western Trust Company v. Canada
In Canadian Western Trust Company v. Canada (Fed CA, 2024) the Federal Court of Appeal dismissed an appeal from a Tax Court ruling, here that denied the appellant's challenge to "reassessments for the 2009-2012 taxation years".
These quotes interpret tax-free savings account (TFSA) trust law, and contrast it with RRSP law:[2] The Tax Court decision turned on the interpretation of subsection 146.2(6) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), which provides that no tax is payable by a tax-free savings account (TFSA) trust except if it carries on one or more businesses, or holds one or more non-qualified investments. It reads in part:"(6) No tax is payable under this Part by a trust that is governed by a TFSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments (as defined in subsection 207.01(1)) for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, … "
"(6) Aucun impôt n’est à payer en vertu de la présente partie par une fiducie régie par un compte d’épargne libre d’impôt sur son revenu imposable pour une année d’imposition. Toutefois, si, au cours de l’année, la fiducie exploite une ou plusieurs entreprises ou détient un ou plusieurs biens qui sont, pour elle, des placements non admissibles, au sens du paragraphe 207.01(1), l’impôt prévu par la présente partie est à payer par la fiducie sur la somme qui correspondrait à son revenu imposable pour l’année si ses seules sources de revenu ou de perte étaient ces entreprises ou ces biens et ses seuls gains en capital ou pertes en capital découlaient de la disposition de ces biens. […] "
"[emphasis added] "
"[mon soulignement]" [3] No facts were in dispute. The sole issue before the Tax Court was whether tax is payable by a TFSA trust on income from carrying on a business of trading in qualified investments. The Tax Court concluded that income earned by a TFSA trust from carrying on any business, including a business involving only qualified investments, is taxable under subsection 146.2(6). As the appellant carried on such a business, the Tax Court dismissed the appeals: Reasons at para. 8.
....
[7] The appellant’s central statutory interpretation argument is that the exemption from tax for a registered retirement savings plan (RRSP) trust on business income from, or from the disposition of, qualified investments (paragraph 146(4)(b)) should be read into subsection 146.2(6). The appellant submits that the RRSP regime and the TFSA regime are "“mirror images”" of each other, and so the exemption should apply to both regimes. The Tax Court disagreed.
[8] The Tax Court conducted a detailed textual, contextual, and purposive analysis, as required: Canada v. Loblaw Financial Holdings Inc., 2021 SCC 51 at para. 41. Beginning with the text, the Tax Court found the phrase "“carries on one or more businesses”" clear, and broad enough to capture all businesses: Reasons at paras. 67 and 89.
[9] In considering context, the Tax Court noted important differences between the TFSA and RRSP regimes; their components were not interchangeable: Reasons at para. 71. If Parliament had wanted to exempt the income of TFSA trusts from carrying on a business of trading in qualified investments, as it did for RRSP trusts, "“[it] would have said so”": Reasons at para. 80.
[10] The Tax Court observed that both it and this Court have confirmed that the purpose of the TFSA regime is to allow Canadians to increase savings by earning tax-free investment income: Reasons at paras. 73-74. That purpose was advanced within certain limits, including the type of income that could accumulate tax-free within a TFSA trust: Reasons at para. 78. The Tax Court refused to override the clear language of subsection 146.2(6) based on purported policies transplanted from a different statutory regime: Reasons at paras. 89 and 92.
[11] We see no legal error in these conclusions.
|
