20 August 2018 External T.I. 2018-0739761E5 - TFSA contributions

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: Whether payments made by a third party on behalf of an individual directly to their TFSA in several scenarios contravene the condition in paragraph 146.2(2)(c) that prohibits anyone other than the holder from making contributions to the TFSA.

Position: No. The payment constitutes a contribution made to the TFSA by the holder of the TFSA.

Reasons: The TFSA holder has ownership of the funds and the payment is made at the direction, or with the concurrence, of the holder.

XXXXXXXXXX 				2018-073976
W. Doiron
August 20, 2018

Dear XXXXXXXXXX:

Re: Contributions to a tax-free savings account

This is in reply to your email of January 15, 2018 in which you ask for confirmation that payments made to a tax-free savings account (“TFSA”) in each of the following three scenarios do not contravene the condition in paragraph 146.2(2)(c) (footnote 1) that prohibits anyone other than the holder from making contributions to the TFSA. We apologize for the delay in our response.

1. An individual makes a gift of money to another individual who then uses the money to make a payment to their own TFSA as a contribution.

2. An employer provides a group TFSA arrangement for its employees under which it makes payments on behalf of each participating employee directly to the employee’s individual TFSA under the group arrangement. The payments are made with the concurrence of the employee and are reported as employment income on the employee’s T4 slip.

3. A beneficiary of a personal trust is entitled to receive a distribution from the trust. As authorized by the terms of the trust, the beneficiary directs the trustee to make a payment of part of their entitlement to the distribution directly to the beneficiary's TFSA.

You also ask whether such payments would constitute an advantage for the purpose of the advantage tax rules in Part XI.01.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.

In each of the above three scenarios, it is our view that the payment constitutes a contribution made to the TFSA by the holder of the TFSA and therefore complies with the requirement in paragraph 146.2(2)(c). It is also our view that the payment would not, in and of itself, constitute an advantage.

We trust our comments will be of assistance.

Yours truly,

Dave Wurtele
Acting Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 Unless otherwise stated, all statutory references in this letter are references to the provisions of the Income Tax Act (the “Act”).