Income Tax Act — I-3.3 146.2
utions and the investing of funds; (c) the arrangement prohibits anyone other than the holder from making contributions under the arrangement; (d) the arrangement permits distributions to be made to reduce the amount of tax otherwise payable by the holder under section 207.02 or 207.03; (e) the arrangement provides that, at the direction of the holder, the issuer shall transfer all or any part of the property held in connection with the arrangement (or an amount equal to its value) to another TFSA of the holder; (f) if the arrangement is an arrangement in trust, it prohibits the trust from borrowing money or other property for the purposes of the arrangement; and (g) the arrangement complies with prescribed conditions. Paragraphs (2)(a), (b) and (e) not applicable (3) The conditions in paragraphs (2)(a), (b) and (e) do not apply to the extent that they are inconsistent with subsection (4). Using TFSA interest as security for a loan (4) A holder of a TFSA may use the holder’s interest or, for civil law, right in the TFSA as security for a loan or other indebtedness if (a) the terms and conditions of the indebtedness are terms and conditions that persons dealing at arm’s length with each other would have entered into; and (b) it can reasonably be concluded that none of the main purposes for that use is to enable a person (other than the holder) or a partnership to benefit from the exemption from tax under this Part of any amount in respect of the TFSA. Right of set-off (4.1) A qualifying arrangement that is a deposit may provide that the issuer has the right to set off any indebtedness owed by the holder to the issuer, or a person related to the issuer, against the holder’s interest in the arrangement if (a) the terms and conditions of the indebtedness and the right of set-off are terms and conditions that persons dealing at arm’s length with each other would have entered into; and (b) it is reasonable to conclude that none of the main purposes for the right of set-off is to enable a person (other than the holder) or a partnership to benefit from the exemption from tax under this Part of any amount in respect of the TFSA. TFSA (5) If the issuer of an arrangement that is, at the time it is entered into, a qualifying arrangement files with the Minister, before March of the calendar year following the calendar year in which the arrangement was entered into (or such later date as is acceptable to the Minister), an election in prescribed form and manner to register the arrangement as a TFSA under the Social Insurance Number of the individual with whom the arrangement was entered into, the arrangement becomes a TFSA at the time the arrangement was entered into and ceases to be a TFSA at the earliest of the following times: (a) the time at which the last holder of the arrangement dies; (b) the time at which the arrangement ceases to be a qualifying arrangement; or (c) the earliest time at which the arrangement is not administered in accordance with the conditions in subsection (2). Trust not taxable (6) No tax is payable under this Part by a trust that is governed by a TFSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments (as defined in subsection 207.01(1)) for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose, (a) “income” includes dividends described in section 83; (b) the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition; and (c) the trust’s income shall be computed without reference to subsecti