16 December 2010 External T.I. 2010-0369721E5 - 146.2(2)(c) - Contributions to a TFSA

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Can a parent write a cheque to her adult child, which the adult child directly deposits into her TFSA?

Position: Generally, yes.

Reasons: There is nothing in the Act preventing a parent from gifting money to an adult child for the purpose of contributing to the adult child's TFSA, provided the gift of money is an outright gift.

XXXXXXXXXX
									2010-036972
									T. Elsey

December 16, 2010

Dear XXXXXXXXXX :

Re: Contributions to a Tax-Free Savings Account ("TFSA")

We are writing in response to your email dated June 3, 2010, concerning contributions to a TFSA. We also acknowledge our conversation of June 24, 2010 (Elsey/XXXXXXXXXX ).

Your request involves a hypothetical scenario where a parent writes a cheque to her daughter, who then deposits the cheque into her own TFSA. You are concerned because paragraph 146.2(2)(c) of the Income Tax Act ("the Act") prohibits anyone other than a holder of a TFSA from making contributions to the TFSA.

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.

In the particular scenario you described, it would be a question of fact as to who has made the contribution to the TFSA. Although no one other than the holder of a TFSA may make contributions to the holder's TFSA, we are of the view that where a parent makes a gift of money to an adult child, who then makes a contribution to her own TFSA, it is the adult child who has made the contribution. We note, however, that if the terms and conditions of the gift do not serve to divest, deprive or dispossess the parent of title to the funds and to vest the property in the adult child's hands, then it may be concluded that a transfer of property has not been made. If, based on the facts, it is the parent who has made the contribution to the adult child's TFSA, the condition in paragraph 146.2(2)(c) of the Act would not be satisfied and the arrangement would no longer qualify as a TFSA pursuant to paragraph 146.2(5)(c) of the Act.

We trust that our comments will be of assistance to you.

Yours truly,

Jenie Leigh
Section Manager
for Division Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch