Regulation 230

Subsection 230(1)

Sale

Administrative Policy

12 November 2019 External T.I. 2019-0822161E5 F - T5008 Statement of Securities Transactions

a contribution of shares to a TFSA is not a “sale” for Reg. 230 purposes

During the 2019 calendar year, Mr. X withdrew the minimum amount (as defined in subsection 146.3(1)) from his RRIF ($5,000 – so that a T4RIF slip is issued to him for $5,000), and effected the withdrawal through the transfer to his regular brokerage account at a licensed securities dealer of 100 common shares of a public corporation with a fair market value at the time of transfer of $5,000. Immediately thereafter, he transferred those shares to his TFSA, using his "unused TFSA contribution room," thereby resulting in a disposition by him of those shares. The dealer filed a TFSA annual information return identifying Mr. X's TFSA contribution of $5,000.

Is the dealer required to file a T5008 slip (with a book value of $5,000 and proceeds of disposition of $5,000) in respect of Mr. X's transfer of his 100 common shares to his TFSA? CRA responded:

[T]he meaning of "sale" is not exhaustively defined for the purposes of section 230 of the Regulations. …

The transfer by an individual TFSA holder of securities to his or her TFSA as a contribution in a situation as described above is not a sale for the purposes of subsection 230(2) or subsection 230(6) of the Regulations, even if there is a disposition of the securities at their fair market value by the individual because of the application of paragraph 69(1)(b) and paragraph (c) of the definition of "disposition" in subsection 248(1). The trader or dealer in securities is not required to file a T5008 slip for this transaction.

Words and Phrases
sale
Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 230 - Subsection 230(2) transfer of listed shares from taxable brokerage account to individual’s TFSA did not generate T5008 reporting requirement 65

Subsection 230(2)

See Also

Chen v. TD Waterhouse Canada Inc., 2020 ONSC 1477

no duty of stock brokers to provide cost information on individual T-5008s

The taxpayer, Mr. Chen, who maintained margin accounts with TD Waterhouse, had employment income of only $9,655 in 2009 and sustained a net loss from his trading active trading in 2009. His accountant advised him that it was unnecessary for him to file a 2009 return, until he had gains against which he could use his capital losses.

In early 2010, TD Waterhouse reported each sale of shares made by Mr. Chen to CRA in a separate T-5008 form. Box 20 of the T-5008 form provided for the cost of the shares to be reported. TD Waterhouse left that box blank in all of its T-5008 forms for all of its customers at all material times, consistent with the industry practice at the time. However, also in early 2010, TD Waterhouse provided to Mr. Chen a T-5008 Summary which provided the cost, sale price, and gain/loss figures for each series of securities in the aggregate, providing all the necessary information to file his T-1 income tax return to properly claim his capital gains and losses for the 2009 taxation year.

As Mr. Chen did not file such return, CRA assessed him in October 2012, by looking only at the proceeds that he received from his many share sales, so that it assessed his total income of as $5,219,671 and, with penalties and interest, assessed his taxes due at $4,121,880.43. Mr. Chen ultimately filed his 2009 income tax return and had the erroneous tax assessment corrected. However, Mr. Chen argued that TD Waterhouse was liable to him in negligence for failing to correctly fill-in the T-5008 forms that it filed with the CRA to report the cost associated with each sale transaction for which it reported the proceeds.

After noting (at para. 47) TD Waterhouse’s argument that s. 150(1.1)(b)(ii) “requires taxpayers who dispose of capital property within the year to file tax returns even if they had no net income and would otherwise be exempted under s. 150(1.1),” Myers J stated (at paras. 51-52) in rejecting Mr. Chen’s submissions and finding no cause of action:

Mr. Chen offers no basis to argue that the law might recognize a duty of care on stockbrokers to provide cost information in T-5008 reporting slips to protect the customers from the risk of harm if they unlawfully failed to file their income tax returns and then CRA took aggressive enforcement positions. TD Waterhouse provided Mr. Chen with all applicable cost information in its T-5008 Summary so that he could file his income taxes as required by law.

That is, despite the possible breach of regulatory or statutory duty, it is still not reasonably foreseeable on any evidence adduced before me that Mr. Chen would have suffered compensable injury by the manner of TD Waterhouse’s tax reporting. Moreover, even if TD Waterhouse owed a duty of care in filing T-5008 forms, the evidence is uncontested that it met the prevailing industry standard at the time.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Negligence, Fiduciary Duty and Fault any loss of taxpayer was attributable to his failure to file his return 264

Administrative Policy

22 January 2020 External T.I. 2014-0559281E5 F - T5008

“cost” of call options closed out by writer is nil, not the cost of offsetting call option purchase/cost re short sale is the FMV of the borrowed shares

CRA responded to various questions respecting the completion of Box 20 of Form T5008 in the context of:

  • the sale (or closing out by the acquisition of an offsetting option) by the writer (on an exchange and through a securities dealer) of securities’ call options that it had written, or
  • the borrowing of shares for a short sale and the subsequent delivery of identical shares to close out the short.

CRA indicated:

“Publicly traded” (as defined in s. 230(1)) option sales transactions conducted as agent for non-exempt clients are included in what must be declared on the T5008 slip by the trader or dealer.

[W]here … the writer and seller of a particular call option purchases another call option traded in the market that has the same characteristics as the particular option, in order to terminate its obligations [thereunder] … the purchase of the call option constitutes a separate transaction … . The cost of purchasing the option should not be treated as the cost of the option at the time the option is granted or sold. The purchase constitutes a transaction subsequent to the sale of the call option by the writer. ...

In the case of the sale of the option by the writer … the cost of the call option sold by the writer is usually nil. Where the cost of the seller's written call option is nil, "0" should be entered in Box 20 of the T5008 slip or the Box should be left blank.

After noting that the short seller acquires the securities borrowed by it at a cost based on their fair market value at the time of the borrowing, which is the cost amount reported in Box 20 when those securities are sold short, CRA noted:

The amount to be entered in Box 20 of the T5008 slip for a short sale of shares is not the cost of the identical shares that are acquired by the short seller and transferred to the lender to cover the short position.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 49 - Subsection 49(1) writing of call option (with deemed nil ACB) is reported as having nil “cost” on T5008 99
Tax Topics - Income Tax Act - Section 40 - Subsection 40(1) - Paragraph 40(1)(a) - Subparagraph 40(1)(a)(i) option writer can deduct its expenses from deemed s. 49(1) proceeds 125
Tax Topics - Income Tax Act - Section 9 - Computation of Profit cost of short sale is FMV of borrowed shares 59

12 November 2019 External T.I. 2019-0822161E5 F - T5008 Statement of Securities Transactions

transfer of listed shares from taxable brokerage account to individual’s TFSA did not generate T5008 reporting requirement

CRA considers that a contribution of shares of a public corporation is not a “sale” of those securities for purposes of Reg. 230. Consequently, there is no obligation of a licensed securities dealer who held shares of a public corporation of an individual in a regular brokerage account to report a transfer of those shares to the individual’s TFSA on a T5008 slip.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 230 - Subsection 230(1) - Sale a contribution of shares to a TFSA is not a “sale” for Reg. 230 purposes 251

RC4268 Handbook on Securities Transactions, A Summary of the Reporting Requirements Under the Income Tax Regulations

FX

Complete all T5008 slips in Canadian currency. Use the exchange rate that was in effect at the time of the transaction or an average rate that includes the transaction period. ...

Proceeds

Proceeds...means the fair market value, and includes all consideration, such as cash, debt obligations, and shares, that is paid or payable to the transferor.

Isssuers

Issuers of securities can include •partnerships; ...•municipal or public bodies...; and •foreign governments

Reg. 230(5) example

[A] coin dealer who buys gold coins, that are not numismatic coins, from an individual has to report the purchase to the individual on a T5008 slip.

Deemed dispositions

You do not have to report deemed dispositions on a T5008 slip.

2 July 2009 External T.I. 2009-0319211E5 F - T5008 : Contrat d'opération à terme (Futures)

amount to be entered on T5008 as "proceeds of disposition or payments" is net gain or loss on closing out futures contract

A client of a brokerage goes long a futures contract on a particular Government of Canada bond series and subsequently closes out the position by establishing the opposite position on the same contract, namely a short position after, in the meantime, having posted or received amounts based on changes in the contract price and the corresponding maintenance margin requirements. In the particular situation, he realizes a gain of $2,600, being the appreciation in the futures price multiplied by the number of contracts in his long position, on closing out that position. What amount should be disclosed as the "proceeds of disposition or payments" in Box 21 of the T5008 slip? After stating that a "long or short position in a CGB contract … is a ‘security’ under paragraph (f) of the definition … [in Reg.] 230(1), CRA stated:

[T]he amount to be entered in Box 21 of the T5008 slip entitled "Proceeds of disposition or settlement amount" is $2,600 which is the total proceeds realized by your client as a result of the liquidation of his open position in the 5 CGB contracts. In addition, we are of the view that the amount to be reported in Box 21 could be a negative amount in a situation where the liquidation of a particular open position in a CGB contract would result in a loss to the holder.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Computation of Profit gain or loss on futures contract determined when closed out on establishing opposite position and not affected by maintenance margin 106

Forms

T5008 "Statement of Securities Transactions"

T5008SUM "Return of Securities Transactions": Box 19 - Face amount...Leave this box blank if the security does not have a face amount (for example, shares or commodities).

T4091 "T5008 Guide - Return of Securities Transactions"

Box 20 - Cost or book value... .The preparer is expected to take reasonable measures in order to ensure that the amount reported in box 20 is correct.

Box 21 - Proceeds... .Do not deduct any expenses from the proceeds

Boxes 22-24 Report in box 21 any part of the proceeds that is credited in money. ...Use boxes [22-24]...to report the transaction only if you cannot reasonably determine the FMV of the securities obtained on conversion. ...[Where you] redeem...a bond for 20 ounces of gold [and]...you could not determine the value of the gold, you would complete boxes 22, 23, and 24 as follows: •Box 22 - MET •Box 23 - 20 OZ •Box 24 - GOLD.

Subsection 230(3)

Administrative Policy

21 February 2017 External T.I. 2016-0676961E5 - T5008

exception for units trading at a fixed price does not apply to USD money market funds

Page 7 of… RC4268) (the “Handbook”) states…:

The purchase (for your own account), sale, redemption, acquisition, or cancellation of units or shares of publicly traded pooled funds, mutual funds and mutual fund corporations qualify as publicly traded securities and have to be reported on a T5008 information return.

Units in a trust that trade at a constant fixed price, such as money market funds, are excluded from this T5008 filing requirement. The income earned from money market funds should be reported on T3 or T5 slips as appropriate.

Does this position apply to units of U.S. dollar denominated money market funds held in a Canadian dollar or U.S. dollar account?

CRA responded:

The position in the Handbook set out above does not apply to units in a U.S. dollar denominated money market fund, regardless of whether the units are held in a Canadian dollar account or a U.S. dollar account. The phrase “constant fixed price” in the Handbook reflects a constant fixed price measured in Canadian dollars.

8 November 2016 External T.I. 2016-0673361E5 - Section 230 of the Regulations

only investment dealer or fund manager generally expected to report MFT fund unit redemptions on T5008s

Where mutual fund securities were held in nominee form by a dealer, are both the dealer and the fund required to issue T5008s under Regs. 230(3) and (6) respectively following redemption of the units (or shares) of a client of the dealer? After indicating that an announcement to the following effect was made at the 29 September 2016 IFIC Conference, CRA stated:

To align industry practices for T5008 slip reporting and filing with the CRA and eliminate the double reporting of dispositions to clients, when investment funds are held in nominee form through an…IIROC…dealer, only the dealer would be required to file the T5008 slips with the CRA and provide a copy of the T5008 slip to the client. When investment funds are held in nominee form through a mutual fund dealer (e.g. … MFDA..or…AMF…), only the fund manager would be required to file T5008 slips with the CRA and provide a copy of the T5008 slip to the client.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 230 - Subsection 230(6) 230(3) trumped by 230(6) 73

Subsection 230(6)

Administrative Policy

8 November 2016 External T.I. 2016-0673361E5 - Section 230 of the Regulations

230(3) trumped by 230(6)

Where mutual fund units (or shares) are held in nominee form with an IIROC dealer or through a mutual fund dealer, after redemption of the units (or shares) only the dealer or fund manager, as the case may be, and not the mutual fund, is expected to issue T5008 slips to the redeemed investor. As worded, this policy also appears to apply to other “investment funds,” e.g., mortgage investment corps.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 230 - Subsection 230(3) only investment dealer or fund manager generally expected to report MFT fund unit redemptions on T5008s 167

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