What do you mean by 'capital gains are taxable to the U.S.??

If you hold a dividend paying U.S. stock in a TFSA, the dividends are subject to U.S. withholding tax and this is not recoverable (it is recoverable for most taxpayers in a non-registered account via the Foreign Tax Credit). However, any capital gains on a U.S. stock in a TFSA are not subject to either Canadian or U.S. capital gains taxes.