https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-3-property-investments-savings-plans/series-3-property-investments-savings-plan-folio-10-registered-plans-individuals/income-tax-folio-s3-f10-c3-advantages-rrsps-rrifs-tfsas.html#toc9

The link above is where I copied what I have pasted below. Red highlighting is by me. It is a CRA document regarding Advantage Taxes (100%). Anyone interested and especially taking issue with anything I state can read this document and form your own conclusions. I am behind on reading posts so I hope I am not duplicating anyone else. Firstly, it appears most postings on this topic are only referring to gains at sale of the equities. CRA talks in terms of benefits which is more expansive. I would think that being able to buy shares at $1.70 now rather than say $10.00 on January 2nd would be considered a benefit by CRA. They might reason that a person would not have bought them at all at $10.00. This might cause them to reason that ownership of the shares is conditional on the plan.

“These rules mainly target abusive tax planning arrangements that seek to artificially shift value into or out of a registered plan while avoiding the statutory limit for contributions or the income inclusion for withdrawals (as applicable). They also apply to benefits and loans that are conditional on the plan,”

The posted below section leaves this possibly open to the Advantage Tax for as long as the shares are owned. If the FMV increases each year, one could have to pay the tax on any increase during that year if CRA claimed that one would not have owned the shares had they not over-contributed. This is an extreme but maybe technically possible. It appears that the tax on these gains has to be paid annually, not at sale.

“3.17 The words directly or indirectly referred to in ¶3.16 (as well as in ¶3.24 and 3.28) encompass not only the increase in the FMV of the registered plan resulting from the initial advantage, but also all future increases in FMV that are reasonably attributable to the initial advantage. These increases include, for example, any increase in the FMV of the plan or any other registered plan of the controlling individual that is reasonably attributable to any of the following:

• any dividends, interest or other amounts paid on any investments involved in the advantage
• any capital appreciation in value on the investments or on any substituted property (whether realized or not)
• any income earned on income”

“In the case of an advantage consisting of an increase in the FMV of plan property attributable to certain transactions or events (described in ¶3.16 to 3.26), each increase in the FMV of plan property constitutes a separate advantage. Theoretically, the FMV increase could be measured on a daily, weekly, monthly or other periodic basis, provided that all of the increase within the measurement period is directly or indirectly attributable to transactions or events listed in the advantage definition. However, because the tax must be remitted annually, the measurement period must end at the end of the calendar year.”

Some of these assumptions might seem a stretch but this is the CRA and a case where they feel persons are trying to game the system and they want to deter such action. A recent case had someone challenge the Advantage Tax on constitutional and other grounds and the court supported the Tax. Another recent case had a judge deem that the CRA was too harsh due to some of the conditions within the case. He did though, state that he did not have the power to overrule the CRA but could only say they were too harsh and ask them to have a different party within the CRA to review their assessment.

I have seen in a corporate audit where the CRA assessed tax on employee’s meal allowances when all of their work was out of town and constantly on the move to different locations. It sounds stupid but they did. They only backed down when it was put to them that they pay not taxed meal allowances to their own agents. The CRA does not always see things the way we would think logical.