Well, I have been chomping at the bit to get my TFTA going. This morning I was going through the application and read the part about "capital gains" being tax free. It then occured to me that profits from short sales are not considered capital gains with respect to taxation. So I asked.
No short sales in a TFSA. So, this is not a major issue except it means that I have to continue to hold two accounts if I want to continue to use short sales (I had considered it almost a must to be able to trade all the time). I think I recall asking this about RRSP accounts quite a while ago and got the same answer so perhaps I should have known.
At least I have been working on my long game lately.