CRA gives an example of where it would waive the 100% advantage tax

One of the conditions for equity of a corporation, partnership or trust to qualify as "excluded property” and, therefore, excluded for the application of the prohibited investment rules, sets limits regarding the “governance of the investment entity.” In its new Folio on the prohibited investment rules, CRA states that this test is not restricted to consideration of the voting rights of the shares:

[T]he phrase governance of the investment entity should be given a wide meaning. For example, where the investment entity is a corporation, the condition might not be satisfied because of the votes that could be cast at either a general meeting of shareholders or at a meeting of the board of directors.

CRA provides an example of a situation where it would give “favourable consideration” to waiving under s. 207.6(2) the 100% advantage tax. The example entails an individual’s TFSA exceeding the 10% threshold in a company as a result of the company redeeming shares of the principal shareholder without the individual finding out about it until a year later, and then the TFSA paying the “advantage” (being the appreciation in the shares while they were a prohibited investment) out to the individual on a taxable basis under s. 207.061 pursuant to a waiver.

Neal Armstrong. Summaries of S3-F10-C2 under s. 207.06(2), s. 207.05(4), s. 207.05(2) and s. 207.01(1) - excluded property – para. (c).