The Financial Post believes they’ve found the individual with the largest TFSA account in Canada.
The article describes how the individual has an amazing $172,382 in his TFSA account.

The problem is, he broke the taxation rules.
The financial planner in the article, purchased the penny stock Fannie Mae (FNMA) (OTCBB).

As per the CRA bulletin, ‘Prescribed Stock Exchanges In and Outside Canada’, this over-the-counter (OTC) security is not a qualified investment for a TFSA.

Should the Canada Revenue Agency (CRA) penalize him?

I’m no tax expert, but yes, I believe the rule has been broken.

Originally, I thought that the penalty would be to pay 1% of the market value of that investment for each of the three months (March 2013 – May 2013) that he held the security in his TFSA. However, a couple of readers have corrected me on this point. The 1% figure is the penalty for over contributions.

The actual penalty could be 50% of the fair market value of the property.

The financial planner in this article probably didn’t realize he had broken the rule. He should contact the CRA for clarification and pay any resulting penalty.

Update June 18, 2013 9:00 pm
Kudos to the Financial Post for updating their online article with the possible CRA implications.
The article now states that the Canada Revenue Agency has been contacted by the Financial Post.

CRA bulletins are often incomplete and subject to misinterpretation.
Here’s hoping that this gentleman gets a favourable CRA ruling and gets to keep the gains from his shrewd stock picking.

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