CRA added investment income to my reassessment that I thought was tax-sheltered — what now?

If CRA has included in your reassessment investment income you believed was sheltered — for example, inside an RRSP, TFSA, or RDSP — start by understanding exactly what CRA is saying. Sometimes the issue is simply a missing T5 or T3 slip that you should have included on your return. In other cases, CRA may be asserting that an investment held inside a registered account was not a "qualified investment" and therefore generated taxable income despite being held in the account.

TFSAs, for instance, can generate taxable income if they hold investments that are not qualified investments under the Income Tax Act, carry on a business, or hold a non-arm's-length investment. A TFSA audit is distinct from an income tax audit and the penalties can be significant. Similarly, prohibited investment rules in RRSPs can cause income to be attributed out of the registered plan.

If the reassessment is based on CRA identifying a missing slip, verify whether the slip was included and provide proof if it was. If CRA is challenging the tax-sheltered status of an investment, you need to assess whether the investment in fact met the qualified investment rules at the relevant time. This is a technical area where professional advice is valuable.