RRSPs are an extremely popular investment vehicle for Canadians.
With the mild weather, it may be easy to forget it is February and
the RRSP deadline is February 29th. (The deadline is usually March
1, but with 2012 being a leap year it will be the last day of
February.) This RRSP season, taxpayers and their advisors should be
aware of a change in the RRSP rules enacted as a result of the 2011
Federal Budget. These new "advantage rules" target tax
avoidance schemes and other structures that most taxpayers would
not be involved in, but these rules also set a trap for the unwary.
If the advantage rules apply, the Canada Revenue Agency
("CRA") may impose a penalty tax of 100%. In general
terms, this 100% tax is on the amount of the "advantage",
which may be the entire value of the investment.
