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Attribution Rules

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Personal Income Tax -> Gifts and inheritances
Wills and Estates

Attribution rules re gifts, transfers, or loans to a spouse or a related minor child

Income Tax Act s 74.1(1), s 74.1(2), s 74.2(1), 74.5(2)

If income-producing property, or money which is used to purchase income-producing property, is transferred or loaned to a related minor, either directly or indirectly, or by means of a trust, the income from the property will normally be attributed back to the person giving the gift or loan.  The capital gains from the property will be considered capital gains of the minor.

A related minor is a child who is under 18 years old and does not deal with the individual at arm's length, or is a niece or nephew of the individual.

If income-producing property, or money which is used to purchase income-producing property, is transferred or loaned to a spouse, either directly or indirectly, or by means of a trust, the income and capital gains from the property will normally be attributed back to the person giving the gift or loan.

In transfers to a related minor or to a spouse, any income earned from the original income (secondary income) will be considered income of the minor or spouse.  An example would be where dividend-producing shares are transferred to a minor or spouse, and dividends are used to purchase more shares.  The dividends from the additional shares would be income of the minor or spouse.

The attribution rules apply only to property income, not to business income earned from money or business assets transferred.

The attribution rules do not apply to loans where interest is charged at a rate at least equivalent to the specified rate of interest.  See our income splitting article on lending to a lower-income spouse or child.

Canada Revenue Agency Resources:

bulletIT511R Interspousal and Certain Other Transfers and Loans of Property

 

Revised: December 23, 2012

 

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