Tax Court Rejects Appeal Over Excess TFSA Amount

Docket: 2026-754(IT)I BETWEEN: [NAME], Appellant, and HIS [NAME] THE [NAME], Respondent . Appeal heard on July 8 and 9, 2026 at Vancouver, British Columbia Before: The [NAME] : For the Appellant: [redacted] Counsel for the Respondent: [redacted]

JUDGMENT In accordance with the attached Reasons for Judgment; The appeal from an assessment made under the Income Tax Act in respect of an “excess TFSA amount” of $17,157.28 for four months in the 2024 calendar year is dismissed, without costs. Signed this 13th day of July 2026. “[NAME]” [NAME] J. Citation: 2026 TCC 134 Date: 20260713 Docket: 2026-754(IT)I BETWEEN: [NAME], Appellant, and HIS [NAME] THE [NAME], Respondent.

REASONS FOR

JUDGMENT [NAME] J.

I. Introduction [ 1 ] [NAME] placed strict limits on the use of a TFSA. And so, consequences flow from contributions to an individual’s TFSA that result in an “excess TFSA amount.” [ 2 ] More specifically, s. 207.02 of the Income Tax Act , R.S.C. 1985 (5th Supp.) c. 1 (the Act) provides that if, at any time in a calendar year, an individual has an excess TFSA amount, the individual shall, in respect of that month, pay a tax under Part XI.01 of the Act equal to 1% of the highest such amount in that month. [ 3 ] An “excess TFSA amount” is determined by a formula set out in the definitions provided in s. 207.01(1). The definition reads, in part, as follows: “excess TFSA amount” of an individual at a particular time in a calendar year means the amount, if any, determined by the formula A−B−C−D−E … [ 4 ] The definition also defines variables A through E, each of which are briefly described below. [ 5 ] Variable A is the total of all amounts each of which is a contribution made under the TFSA by the individual in the calendar year and at or before the particular time, subject to exceptions which do not apply here. [ 6 ] Variable B is the individual’s unused TFSA contribution room at the end of the preceding year. [ 7 ] Variable C reflects the total of all amounts distributed from the individual’s TFSA in the preceding year, subject to certain exclusions. As such, amounts included in variable C reduce an individual’s excess TFSA amount. [ 8 ] Variable D is the TFSA dollar limit for the calendar year if, at any time in the calendar year, the individual is resident in Canada, and nil in any other case. [ 9 ] Variable E has a lengthy definition but simplified it is the total of all amounts each of which is the qualifying portion of a distribution made in the calendar year.

II. Essential Facts [ 10 ] The following are the essential facts, and none are disputed: The appellant’s unused TFSA contribution room at the end of the preceding year (i.e., 2023) was $29,842.72. [1] The TFSA limit for the 2024 calendar year was $7,000. On April 3, 2024, the appellant withdrew $27,000 from her TFSA. On May 9, 2024, the appellant contributed $27,000 to her TFSA. On September 6, 2024, the appellant withdrew $27,000 from her TFSA. On September 10, 2024, the appellant contributed $27,000 to her TFSA. [ 11 ] The Minister of National Revenue assessed on the basis that the appellant had an excess TFSA amount of $17,157.28 in the months of September, October, November, and December of 2024. The Minister computed the appellant’s liability for tax under s. 207.02 as 1% of $17,157.28 (or $171.57) for these four months. The total assessed amount is $686.29 ($171.57 x 4). The Minister also assessed a late-filing penalty of $34.31.

III. The Appellant had an Excess TFSA Amount [ 12 ] In the circumstances of this case, the relevant amounts as of September 2024 and continuing through to December 2024 are as follows: Variable Amount Description A $54,000.00 Computed based on the contribution of $27,000 on May 9, 2024, plus another contribution of $27,000 on September 10, 2024 B $29,842.72 Computed as set out in footnote 1 C Nil There is no evidence that the appellant withdrew amounts from the TFSA in 2023 D $7,000.00 This is the TFSA dollar limit for 2024 as defined in s. 207.01(1) E Nil In simple terms, only that portion of a distribution that is required to reduce or eliminate an individual’s excess TFSA amount is included in determining variable E [ 13 ] The appellant pleaded that the deposits made on May 9, 2024, and September 10, 2024, consisted entirely of funds withdrawn earlier in the same year and did not represent new savings or additional capital. And during the hearing, the appellant testified that her plans changed after the withdrawals and so she re-contributed the funds. She acknowledged her mistake and emphasized that she did not intend to overcontribute to her TFSA. [ 14 ] The TFSA rules, enacted by [NAME], provide that an individual can only replace or re-contribute all or part of any withdrawals from a TFSA in the same year if the individual has available contribution room; the formula for computing an excess TFSA amount does not take into account amounts withdrawn from a TFSA in the year (see variable C, which applies only to the preceding year). Moreover, any amount withdrawn in the year may only be recontributed in the year after the withdrawal. [ 15 ] If there is insufficient contribution room and amounts are re-contributed during the same year, this will trigger an excess TFSA amount and results in a liability for tax under s. 207.02 equal to 1% of the highest excess TFSA amount in the month, for each month that the excess stays in the TFSA. [ 16 ] Here, based on the formula, the appellant had an excess TFSA amount of $17,157.28 in September 2024. This is computed as $54,000 (A) minus $29,842,72 (B) minus $7,000 (D), which equals $17,157.28. The excess TFSA amount continued throughout the months of October, November, and December of 2024. As such, the appellant is liable for tax under s. 207.02 of Part XI.01 computed at 1% of $17,157.28 ($171.57) for each of the four months, which totals $686.29 as assessed by the Minister. [ 17 ] It bears mentioning that the appellant did not have an excess TFSA amount during the month of May when she re-contributed the $27,000 withdrawn in April. This is because during the month of May, variable A ($27,000) minus variable B ($29,842,72) minus variable D ($7,000) did not result in an excess TFSA amount. In other words, the appellant had sufficient contribution room at that time. But that was not the case when the re-contribution cycle occurred for the second time in September and then variable A totalled $54,000.

IV. Late-Filing Penalty [ 18 ] Subsection 207.07(1) requires a person who is liable to pay tax under Part XI.01 for all or any part of a calendar year to file a return for the year in prescribed form and to pay the tax imposed under s. 207.02. The return must be filed with the Minister before July of the following calendar. Here, the return was due by June 30, 2025. The appellant did not file the necessary return and did not pay the tax when it was due. (The Minister assessed the appellant a few days later, on August 6, 2025.) [ 19 ] Subsection 207.07(3) adopts various provisions in Part I of the Act, including s. 162, with any modifications that the circumstances require. Subsection 162(1) imposes a late-filing penalty on every person who fails to file a return as and when required. Here, the penalty is equal to 5% of the tax payable under Part XI.01 of $686.29, which is $34.31.

V. Jurisdiction [ 20 ] In her notice of appeal, the appellant requests that this Court cancel the tax assessed under s. 207.02 for the excess TFSA amount, and to cancel the penalty and related interest. Moreover, during the hearing the appellant seemed unsure about this Court’s role. And so, a few comments about jurisdiction are necessary. [ 21 ] [ADDRESS]’s role is to determine the correctness of the assessment made under s. 207.02. [ 22 ] [NAME] granted the Minister discretion to waive (before assessment) or cancel (after assessment) all or part of a liability under s. 207.02: see s. 207.06(1). Moreover, [NAME] granted the Minister discretion to cancel a penalty or interest: s. 220(3.1). [ 23 ] [ADDRESS] does not have jurisdiction to order the Minister to exercise the discretion to cancel the tax assessed (see also [NAME] v. The Queen , 2019 TCC 200 at para. 29; and see [COMPANY]. v. Canada , 2018 FCA 136 at para. 19). Likewise, this Court does not have jurisdiction to order the Minister to exercise the discretion given to the Minister to cancel a penalty or interest. [ 24 ] Any request for the waiver of the tax under s. 207.06(1), or for the cancellation of the penalty or interest under s. 220(3.1), must be made to the Minister. The jurisdiction to review a decision of the Minister under those provisions lies with the Federal Court through an application for judicial review.

VI. Conclusion [ 25 ] The appeal must be dismissed. There will be no award of costs. Signed this 13th day of July 2026. “[NAME]” [NAME] J. CITATION: 2026 TCC 134 COURT FILE NO.: 2026-754(IT)I STYLE OF CAUSE: [NAME] v. HIS [NAME] THE [NAME] OF HEARING: Vancouver, British Columbia DATE OF HEARING: July 8 and 9, 2026

REASONS FOR

JUDGMENT BY: The [NAME] OF

JUDGMENT: July 13, 2026 APPEARANCES: For the Appellant: [redacted] Counsel for the Respondent: [redacted] COUNSEL OF RECORD: For the Appellant: [redacted] n/a Firm: n/a For the Respondent: [redacted] Ottawa, Canada [1] Paragraph 15(b) of the reply states the Minister assumed that on January 1, 2024, the appellant had a TFSA contribution limit of $36,842.72. However, what is relevant and necessary to determine whether there is an excess TFSA amount is the individual’s unused TFSA contribution room at the end of the preceding calendar year. Here, I have backed out the TFSA dollar limit of $7,000 for the 2024 calendar year to determine that the appellant’s unused TFSA contribution room at the end of 2023 was $29,842.72.