If you trade shares actively in your RSP but later invest outside the RSP in a fund that pays a high annual return, does your RSP trading history allow you to claim a loss on the fund as a “business” loss? No.
Mr. Prochuk made about $100,000 a year over a 13-year period, trading shares in his RSP account. He lived on that return. He reported his RSP withdrawals as income but did not report any source of business or property income in those years. In 2005, he invested $250,000 in an offshore foreign exchange fund which promised a return of 17.5% a year. Under the subscription terms, Mr. Prochuk’s investment was locked-in for 2 years. The investment was a fraud; he lost about $180,000. He sought to claim the loss as a business loss. CRA and the TCC refused; it was a capital loss.
“[T]he [Income Tax] Act treats an individual who trades within his RRSP differently than a taxpayer who is in the business of trading. For this reason, trades within an RRSP are not relevant in deciding whether an individual is in the business of trading.” (Para. 48.)
Mr. Prochuk said that, if the Court said he was not in business of trading in shares because he used his RSP, then his investment in the fund was an “adventure in the nature of trade”, which the ITA defines as a “business”. But Justice D’Auray said that Mr. Prochuk hadn’t bought the shares to flip them; he bought to hold and get a 17.5% return; so his purchase was not an “adventure in the nature of trade”. (Paras. 55-56.)