CRA declines to state a s. 237.3 safe harbour for a financial planner who is unaware of the tax planning

A financial advisor (Ms. A), at the request of Mr. B’s tax advisor, sells a generally-available financial product to Mr. B and receives compensation directly from the issuer of the product based on the amount invested by Mr. B.

Subsequently, the tax advisor, without Ms. A’s knowledge, combines the financial product with certain other tax strategies where the existence and amount invested by Mr. B is used to obtain a tax benefit. Mr. B is reassessed on the basis that the purchase of the financial product was part of a series of transactions that included an avoidance transaction, so that such purchase (being part of the series) was a reportable transaction. Did Ms. A nonetheless have no reporting obligation under the current version of s. 237.3(2)?

CRA indicated that “[b]ased on the limited facts provided” it could not confirm that Ms. A had no such reporting obligation and that, in determining whether Ms. A has an obligation to file an information return under s. 237.3(2)(c) or (d), it would consider factors such as:

• whether Ms. A is an advisor or a promoter in respect of the sale of the financial product (notably whether she acted in a manner described in the definition of “advisor” or “promoter” in s. 237.3(1) in respect of the sale of the financial product);
• the terms of the sale of the financial product and the series of transactions, of the financial product, and of the consideration received by Ms. A from the financial services corporation;
• whether Ms. A is dealing at arm’s length with an advisor or promoter in respect of any transactions in the series; and
• who was entitled to a fee referred to in para, (c) of “reportable transaction” in s. 237.3(1).

Neal Armstrong. Summaries of 3 May 2022 CALU Roundtable Q. 3, 2022-0928721C6 under s. 237.3(2)(c) and s. 237.3(1) – Reportable Transaction – para. (a).