Gifts to Spouse or Children
Unlike the US, Canada doesn’t impose a tax on gifts from one person to another. This doesn’t mean, however, that there aren’t tax consequences to gifts. The advice of a Chartered Professional Accountant can help you figure out the tax consequence of gifts so you can avoid a future problem or CRA audit Toronto. If you have made a mistake, contact a Chartered Professional Accountant to correct it using the CRA Voluntary Disclosure Program.
Gifts between unrelated parties don’t usually cause negative tax consequences. But gifts between spouses or between parents and minor children can be captured by the attribution rules of the Income Tax Act. Also, in certain cases, gifts can have the effect of your spouse or children being assessed through a CRA Audit Toronto where you have a tax debt owing. A Chartered Professional Accountant can help you get clarity on your case.
The attribution rules in the Income Tax Act are complex, but a Chartered Professional Accountant can help you make sense of them. In short, the rules are meant to stop people from splitting income from property between the family unit consisting of spouses and minor children. Property isn’t limited to real property but includes anything that can produce a return, including money. For example, where one spouse gives another a gift of money or a loan of money at no interest, and that money is used by the spouse to purchase shares of a company, then any return on those shares, including dividends or capital gains on sale, are attributed back to the first spouse. Even though the return legally belongs to one spouse, it is treated as if the income belongs to the other spouse. Somewhat similar rules also apply to gifts or loans of property, including money, to minor children. The most common offender of CRA Audit Toronto is money in joint bank accounts or shares investment accounts.
There are a number of exceptions and tax planning uses of these attribution rules. Whether you are looking to take advantage of these rules, to avoid having them apply to your gifts or loans, or want to correct mistaken reporting because you didn’t know about these rules, contact a Chartered Professional Accountant at Faris CPA for help. We can help avoid a CRA Audit Toronto, help you through an existing CRA Audit Toronto, or help you fix mistakes using the CRA Voluntary Disclosure Program.
Disclaimer: Articles are for general information only and do not constitute tax advice. They cannot be relied upon.
Sam Faris is a Toronto-based Chartered Professional Accountant who practices as an independent consultant on high-level Canadian tax matters and handles disputes with CRA. He has recently published an article a business magazine: HERE.