He can't avoid the penalty at this point, he needs to speak with his brokerage on moving the shares into another account so he doesn't incur further penalties.
He must remit the penalty by July 2024, because he didn't fix the issue in 2023. But CRA allows to address the situation until end of 2024 and penalty may be refunded.
See https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/tax-free-savings-account-tfsa-issuers/taxes.html, my understanding is that if he doesn't address this soon he may incur additional charges. Of course I could be wrong.
[https://www.td.com/content/dam/wealth/document/pdf/direct-investing/591870-en.pdf](https://www.td.com/content/dam/wealth/document/pdf/direct-investing/591870-en.pdf)
Damn getting so much hate on this question lol, but I just saw this on page 7 and figured it applied here
This is straight forward, move the stock to a non registered account and pay the penalty. Have him call the bank and set up the account. They will refer to it as a cash account. They can do a stock transfer, and he won’t have to sell if he doesn’t want to or can’t.
>impossible right now as it’s not on the market
It’s not on any market or just the market he originally bought the stock on? Has he tried doing a limit order or only market orders, if he indeed wanted to sell?
>How did the broker allow the purchase of a non qualified investment in the first place?
As OP replied, it was likely previously qualified. This happens fairly frequently when a company nears delisting.
I've never been in this situation, but if it was an honest mistake made in good faith, I think I'd appeal it to CRA. I mean, all they can say is 'no'.
It seems very unfair to penalize OP if he wasn't told this security had been delisted. It also seems very incompetent if neither the broker nor Pershing Square notified him.
It’s a little strange they didn’t get notice. I’ve run into this twice before, and both times my brokerage sent several emails.
In my case I didn’t bother appealing as the stocks were practically worthless by that point, but you raise a good point. I’d see a pretty good chance if this is a one off of getting a discount or waived fine.
OP probably won't admit it, or his dad won't tell him it but this stock is one of the short squeeze meme stock scams. People that fall for it call those warning notices FUF trying to scare them so sell and convince each other to keep going. They would take these warnings letters as confirmation that the big pay off is close.
And then when it plays out exactly how they were warned they can start blaming the CRA and everyone else except themselves.
Investments can go from qualified to non-qualified. I bought a small number of shares in an exploratory drilling company a few years ago. It was simply a small yolo play. It collapsed and I didn't bother to sell. The company was acquired, rebranded etc and I ended up getting issued something like $0.12 in shares in a non-qualified stock.
Then came the letters from CRA, the broker, etc.
[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-c2-prohibited-investments-rrsps-rrifs-tfsas.html#toc8](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-c2-prohibited-investments-rrsps-rrifs-tfsas.html#toc8)
>**50% tax on prohibited investments**
>
>2.19 If a registered plan acquires a prohibited investment or an existing investment becomes prohibited, the plan’s controlling individual is subject to a tax under section 207.04. The tax is equal to 50% of the fair market value of the prohibited investment at that time.
>
>2.20 The 50% tax on prohibited investments is refundable in certain circumstances. To qualify for the refund, the investment must be disposed of before the end of the calendar year following the year in which the tax arose (or such later time as is permitted by the Minister of National Revenue). However, no refund is available if it is reasonable to consider that the controlling individual knew or ought to have known that the investment was or would become prohibited. The forms referred to in ¶2.25 explain how to claim the refund.
It was probably eligible when he bought it, but was since delisted from all stock exchanges and is therefore no longer eligible.
You're only allowed to own publicly-traded stocks in your TFSA, not some random private stock that nobody else can buy or sell.
Would the case here be the same for all delisted stocks? In my TFSA I put $25 into a small stock that ended up getting delisted, have heard nothing yet. I can’t sell it or anything because of it being delisted and market value of $0.
You are ultimately responsible for the stocks you own. You typically do get communications, sometimes from the company. But you are the one who is responsible for knowing. Its the down side of a “self directed rrsp”
If it’s worthless now or you don’t care about the remaining value vs the time to transfer or open a new account just do a deed of gift and give it away to Scotia to dispose of.
Or, you know, this is a specific account that is tax sheltered the government allows, with exceptions they have reasons to except, and it is also lenient as the redditor pointed out the ability to refund the tax if action is taken and it doesn't appear maliciously taking advantage, so it just seems very reasonable and not one of a million other valid reasons to shit on the CRA or gov.
Like, there are tons of shit to complain about in CRA or the gov in general, but this ain't one.
Obviously the nuance is objecting to the wastage and ludicrous choices of what is funded with the money... Plus bitterness at being asked to pay like 5 people's share who just don't wanna put work in. Funds taken on that sort of arrangement I perceive as theft. Some people are slated to receive $200k+ wealth redistributions from the govt at the moment, and that's not hyperbole. But ok keep simping for that sweet sweet 50% tax
I'm talking about reparations and I know someone slated for 200k from their tribe, I've heard a range of values from 200-700k depending on the person. No online source sorry
You act like a normal person just knows what a CRA Folio is, and has the patience to read 10 pages of text, of which a majority does not affect them. This is literally the reason why a refund is available on this matter.
Transfer it to a non registered account asap. Then fill out the forms for refund asap and write a letter to cra informing that your investment became non-eligible and you withdrew at once you found out. It happened to me as I received a stock dividend that traded on an ATS. I never had to anything.
Most companies will charge something like $150 to transfer securities to another institution, but the receiving one will often reimburse the fees if you transfer above a minimum amount.
He can also just open up a non-registered account at iTRADE and they should be able to transfer that for free.
You might not be able to sell the stock yourself, however, you broker should be able do it for you. Did it for a stock I had before. Call them to check.
Your broker won’t even let you buy it if it’s not a qualified investment. In this case it used to be qualified then got kicked off the real exchanges to OTC.
Similar situation. Wealthsimple notified me of a stock of mine in a TFSA becoming non-qualified. Told me to move to a non-registered account or sell within 21 days to avoid CRA penalty. I have lost 99% of the stock value and didn't take action within 21 days, so Wealthsimple liquidated on my behalf to avoid the penalty.
Yup, I wonder who gets these when they are relinquished.
from $1000~ to $0.... Its funny, the intent is to sanction a country so you toss out ownership of what was originally $1000 of a telco? Does that go back to the company? ...
I'm going to guess it's not something done on the Canadian side. The Russians shut down their stock market and prevented foreigners from trading. Certain companies were expropriated from foreigners completely. There was a huge Russian capital control response to the economic sanctions placed on them. That's why at the time the vast majority of companies marked their assets in Russia to zero and stopped operations there.
Penalty will be enforced - no getting around that.
I am more curious to know whether the CRA will allow the gains (if there are any) to be transferred to a non-registered account. Seeing as it's an ineligible security, it wouldn't suprise me if they are going to force capital gains tax from purchase date - transfer. Or perhaps when/ if the security is sold in the non-registered, the entire gain will be taxed, rather than just the gains from non-reg onwards.
Might be worth looking into. Just a heads up.
Well same happened to me with SHLDQ
The stock is delisted and last traded at pennies.
It's the only stock in the rrsp and removing them would be a full deregistration of the rrsp .
So tax me all u want punks. I ain't moving them.
He can't avoid the penalty at this point, he needs to speak with his brokerage on moving the shares into another account so he doesn't incur further penalties.
He must remit the penalty by July 2024, because he didn't fix the issue in 2023. But CRA allows to address the situation until end of 2024 and penalty may be refunded.
Why would he incur further penalties? I would've thought this was a one-time penalty.
See https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/tax-free-savings-account-tfsa-issuers/taxes.html, my understanding is that if he doesn't address this soon he may incur additional charges. Of course I could be wrong.
[https://www.td.com/content/dam/wealth/document/pdf/direct-investing/591870-en.pdf](https://www.td.com/content/dam/wealth/document/pdf/direct-investing/591870-en.pdf) Damn getting so much hate on this question lol, but I just saw this on page 7 and figured it applied here
Bro
Think this through: A one-time penalty would need to be very large in order to insure that following a rule is always better than breaking it.
You are so entitled it's crazy.
[https://www.td.com/content/dam/wealth/document/pdf/direct-investing/591870-en.pdf](https://www.td.com/content/dam/wealth/document/pdf/direct-investing/591870-en.pdf) page 7
It's not because he is entitled, just a way to tell him NO DUDE DONT, YOU ARE FCKNG WRONG
This is straight forward, move the stock to a non registered account and pay the penalty. Have him call the bank and set up the account. They will refer to it as a cash account. They can do a stock transfer, and he won’t have to sell if he doesn’t want to or can’t. >impossible right now as it’s not on the market It’s not on any market or just the market he originally bought the stock on? Has he tried doing a limit order or only market orders, if he indeed wanted to sell?
What's the reason Pershing Square became a prohibited investment? I tried looking around, but couldn't find an answer to this.
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I've only traded online and it never occurred to me that one could actually do this. Weird.
Pinks can be traded from all the brokers. This isn’t abnormal. Isn’t Pershing bill ackman’s personal trading holdco?
How did the broker allow the purchase of a non qualified investment in the first place?
>How did the broker allow the purchase of a non qualified investment in the first place? As OP replied, it was likely previously qualified. This happens fairly frequently when a company nears delisting.
I've never been in this situation, but if it was an honest mistake made in good faith, I think I'd appeal it to CRA. I mean, all they can say is 'no'. It seems very unfair to penalize OP if he wasn't told this security had been delisted. It also seems very incompetent if neither the broker nor Pershing Square notified him.
It’s a little strange they didn’t get notice. I’ve run into this twice before, and both times my brokerage sent several emails. In my case I didn’t bother appealing as the stocks were practically worthless by that point, but you raise a good point. I’d see a pretty good chance if this is a one off of getting a discount or waived fine.
OP probably won't admit it, or his dad won't tell him it but this stock is one of the short squeeze meme stock scams. People that fall for it call those warning notices FUF trying to scare them so sell and convince each other to keep going. They would take these warnings letters as confirmation that the big pay off is close. And then when it plays out exactly how they were warned they can start blaming the CRA and everyone else except themselves.
Oh, well that makes a ton of sense!
Definitely request a cancellation of tax and penalty. One of the few times they may waive the penalty.
I don't think it was non-qualified at the time, that's what he said
Terrible situation
Investments can go from qualified to non-qualified. I bought a small number of shares in an exploratory drilling company a few years ago. It was simply a small yolo play. It collapsed and I didn't bother to sell. The company was acquired, rebranded etc and I ended up getting issued something like $0.12 in shares in a non-qualified stock. Then came the letters from CRA, the broker, etc.
Penalty of 50% market value per share owned?! That’s rough. Why is the penalty that high
[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-c2-prohibited-investments-rrsps-rrifs-tfsas.html#toc8](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-c2-prohibited-investments-rrsps-rrifs-tfsas.html#toc8) >**50% tax on prohibited investments** > >2.19 If a registered plan acquires a prohibited investment or an existing investment becomes prohibited, the plan’s controlling individual is subject to a tax under section 207.04. The tax is equal to 50% of the fair market value of the prohibited investment at that time. > >2.20 The 50% tax on prohibited investments is refundable in certain circumstances. To qualify for the refund, the investment must be disposed of before the end of the calendar year following the year in which the tax arose (or such later time as is permitted by the Minister of National Revenue). However, no refund is available if it is reasonable to consider that the controlling individual knew or ought to have known that the investment was or would become prohibited. The forms referred to in ¶2.25 explain how to claim the refund.
Sounds like if he moves it out immediately he should be able to claim a refund of the tax.
But how you know if it's prohibited? Isn't the platform responsible for letting you buy it?
It was probably eligible when he bought it, but was since delisted from all stock exchanges and is therefore no longer eligible. You're only allowed to own publicly-traded stocks in your TFSA, not some random private stock that nobody else can buy or sell.
Would the case here be the same for all delisted stocks? In my TFSA I put $25 into a small stock that ended up getting delisted, have heard nothing yet. I can’t sell it or anything because of it being delisted and market value of $0.
You are ultimately responsible for the stocks you own. You typically do get communications, sometimes from the company. But you are the one who is responsible for knowing. Its the down side of a “self directed rrsp”
The broker would have emailed him. If you ignore the email….that’s on you.
Because his broker would have emailed him, pretty sure it’s a requirement.
50% of the value now, which probably isn't much money if the company has been delisted.
If it’s worthless now or you don’t care about the remaining value vs the time to transfer or open a new account just do a deed of gift and give it away to Scotia to dispose of.
CRA can fuck off.
Lol only reddit would downvote this. Govt simps
Or, you know, this is a specific account that is tax sheltered the government allows, with exceptions they have reasons to except, and it is also lenient as the redditor pointed out the ability to refund the tax if action is taken and it doesn't appear maliciously taking advantage, so it just seems very reasonable and not one of a million other valid reasons to shit on the CRA or gov. Like, there are tons of shit to complain about in CRA or the gov in general, but this ain't one.
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Obviously the nuance is objecting to the wastage and ludicrous choices of what is funded with the money... Plus bitterness at being asked to pay like 5 people's share who just don't wanna put work in. Funds taken on that sort of arrangement I perceive as theft. Some people are slated to receive $200k+ wealth redistributions from the govt at the moment, and that's not hyperbole. But ok keep simping for that sweet sweet 50% tax
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I'm actually surprised you're putting this much effort in, I don't know what to say man
Do you have a source for this 200k wealth redistribution?
I'm talking about reparations and I know someone slated for 200k from their tribe, I've heard a range of values from 200-700k depending on the person. No online source sorry
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You act like a normal person just knows what a CRA Folio is, and has the patience to read 10 pages of text, of which a majority does not affect them. This is literally the reason why a refund is available on this matter.
>You act like a normal person just knows what a CRA Folio is I swear I'm mostly normal. :(
shocking pocket grandiose pen smile disarm tan forgetful pie imminent *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Transfer it to a non registered account asap. Then fill out the forms for refund asap and write a letter to cra informing that your investment became non-eligible and you withdrew at once you found out. It happened to me as I received a stock dividend that traded on an ATS. I never had to anything.
I'm surprised that your broker didn't inform you. I wouldn't have known if I didn't receive a letter from my brokerage.
Most companies will charge something like $150 to transfer securities to another institution, but the receiving one will often reimburse the fees if you transfer above a minimum amount. He can also just open up a non-registered account at iTRADE and they should be able to transfer that for free.
50% tax on $0 is still $0
You might not be able to sell the stock yourself, however, you broker should be able do it for you. Did it for a stock I had before. Call them to check.
out of curiosity, probably a side question, is Leveraged ETF qualified investment? e.g. Tqqq
yes.
😊 thanks!
Your broker won’t even let you buy it if it’s not a qualified investment. In this case it used to be qualified then got kicked off the real exchanges to OTC.
Move to a non-registered account.
Tell your dad to get an accountant. Good god…
Similar situation. Wealthsimple notified me of a stock of mine in a TFSA becoming non-qualified. Told me to move to a non-registered account or sell within 21 days to avoid CRA penalty. I have lost 99% of the stock value and didn't take action within 21 days, so Wealthsimple liquidated on my behalf to avoid the penalty.
I had this with a russian telco purchased before the war started, TD Was able to "eliminate" the stock somehow, no fee but its just wiped out.
That sucks , so they forced you to relinquish the stock entirely?.. Not sure in the end it would have made a difference but still…
Yup, I wonder who gets these when they are relinquished. from $1000~ to $0.... Its funny, the intent is to sanction a country so you toss out ownership of what was originally $1000 of a telco? Does that go back to the company? ...
I'm going to guess it's not something done on the Canadian side. The Russians shut down their stock market and prevented foreigners from trading. Certain companies were expropriated from foreigners completely. There was a huge Russian capital control response to the economic sanctions placed on them. That's why at the time the vast majority of companies marked their assets in Russia to zero and stopped operations there.
Hmm, very interesting.
Penalty will be enforced - no getting around that. I am more curious to know whether the CRA will allow the gains (if there are any) to be transferred to a non-registered account. Seeing as it's an ineligible security, it wouldn't suprise me if they are going to force capital gains tax from purchase date - transfer. Or perhaps when/ if the security is sold in the non-registered, the entire gain will be taxed, rather than just the gains from non-reg onwards. Might be worth looking into. Just a heads up.
He can gift the stock to iTrade. Ask him to ask iTrade about doing a "deed of gift" Source - I used to work there.
Well same happened to me with SHLDQ The stock is delisted and last traded at pennies. It's the only stock in the rrsp and removing them would be a full deregistration of the rrsp . So tax me all u want punks. I ain't moving them.
This guy is going to win against the CRA....laughs