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Financial Information
Gifts/Inheritances

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Personal Income Tax -> Gifts and inheritances
Wills and Estates

Are gifts or inheritances taxable?

There is no "gift tax" in Canada.  Any resident of Canada who receives a gift or inheritance of any amount from almost source (except from an employer) will not have to include this in their income.  However, if capital property (real estate, other than a principal residence, or investments) is given as a gift, the person who has given the gift will be deemed to have sold the capital property at fair market value, and will have to pay tax on any resulting capital gain.  The fair market value is deemed to be the "cost" to the person to whom the shares were given.  If money or capital property is given or loaned to a spouse or a related minor child, attribution rules will apply.

See our article on attribution rules re gifts, transfers, or loans to a spouse or a related minor child.

Gifts from an employer

The above does not include gifts from an employer to an employee, which will likely be considered a taxable benefit to the employee.   CRA has a series of questions that an employer can answer to determine if there is a taxable benefit.  This is found on their web page Rules for Gifts and Awards.  For more information on gifts or awards for employees, see the Canada Revenue Agency ( CRA) guide T4130 Employers' Guide Taxable Benefits, and search for the topic "Gifts, awards and social events".

Capital property owned at death

There are tax consequences to the estate of a deceased taxpayer when capital property is owned at death.  See How can you minimize taxes of a deceased taxpayer? from the Wills & Estates page.

Gift from someone in debt to Canada Revenue Agency

Income Tax Act s. 160

If a tax debtor transfers cash or other property, directly or indirectly, by means of a trust or by other means whatever, to:

bullettheir spouse or common-law partner, or someone who has since become their spouse or common-law partner,
bulleta person who is under 18 years of age, or
bulleta person with whom they are not dealing at arm's length

then the recipient of the cash or other property can be held liable to pay outstanding tax liabilities of the transferor, up to the fair market value of the property transferred, less the fair market value of anything that was given in return.

This applies, for instance, if a spouse transfers his or her interest in the family home to the other spouse.  It could also apply if a private corporation pays dividends when there is an outstanding tax liability.  See the arm's length article.

Related Tax Court Cases / Newspaper Articles:

bulletGagnon v. The Queen 2010 re transfer of the husband's half of the family home
bulletHennig v. The Queen 2012 re payment of dividends from a corporation
bulletBeware the tax nightmare disguised as a gift - Globe and Mail

 

See also:  Non-taxable income

 

Revised: November 27, 2013

 

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