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Home  ->  Personal Income Tax  ->  Wills and Estates-  > Gifts and inheritances

When Are Gifts or Inheritances Taxable?

No Gift Tax in Canada

There is no "gift tax" in Canada.  Any resident of Canada who receives a gift or inheritance of any amount, except from an employer, or as a tip or gratuity due to their employment, will not have to include this in their income.  However, if the gift is received by a spouse or a related minor child, see the next paragraph re attribution rules regarding the income, if any, from the gift.  If the gift is capital property, or is a gift from someone in debt to Canada Revenue Agency, there can be other complications - see below.

Gifts or Loans to a Spouse or Related Minor Child

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

Gifting a Capital Property is a Disposition

However, if capital property (e.g. real estate, 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 (FMV), and will have to pay tax on any resulting capital gain.  The FMV 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.

Selling Capital Property Non-Arm's Length For Less Than Market Value

As pointed out by the Video Tax News team in the April 2019 Life In The Tax Lane video, there could be a problem if capital property is sold to a non-arms-length person for less than FMV.

See Technical Interpretation 2018-0773301E5 Paragraph 69(1)(c) and Nominal Consideration.

Subsection 69(1) of the Income Tax Act deems the proceeds to be at FMV when a taxpayer has disposed of a property non-arm's-length for no proceeds or for proceeds less than FMV.  However, it only deems the acquisition cost of the recipient to be at FMV if the property has been acquired at a cost higher than FMV, or by way of gift, bequest or inheritance.  It does not deem the cost to the recipient to be at FMV where the cost is less than FMV (inadequate consideration).  This may result in the selling taxpayer to have deemed proceeds of FMV while the acquiring taxpayer must use the actual transaction amount as their cost, resulting in double taxation of the difference between FMV and the inadequate consideration.


bulletTaxpayer A and Taxpayer B are considered to be not dealing at arm's length.
bulletTaxpayer A gifts a capital property valued at $10,000 to Taxpayer B for proceeds of $1, merely to ensure that the agreement is legally binding.  It is possible that this could be considered by Canada Revenue Agency (CRA) to be a gift.
bulletS. 69(1)(b) of the Income Tax Act (ITA) will apply to deem Taxpayer A to have received proceeds of disposition of $10,000, FMV.
bulletIf it is determined that the transfer was a gift, s. 69(1)(c) of the ITA will apply to deem Taxpayer B to have acquired the property for $10,000, FMV.
bulletIf it is determined that the transfer was a sale for inadequate consideration rather than a gift, s. 69(1)(c) will not apply, and the acquisition cost to Taxpayer B will be $1, even though Taxpayer A has deemed proceeds of $10,000.

If Taxpayer A had sold the property to Taxpayer B for $12,000, s. 69(1)(a) of the ITA applies to deem the acquisition price to Taxpayer B to be $10,000.  The proceeds of disposition for Taxpayer A is still $12,000.

Tax Tip:  If you plan to gift capital property or transfer it at less than cost, get professional tax advice first!

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 Gifts, Awards and Long Service 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

Dreger v. The Queen 2020 TCC 25 re daughters designated as beneficiaries of life income funds of a deceased tax debtor.

Gagnon v. The Queen 2010 re transfer of the husband's half of the family home

Hennig v. The Queen 2012 re payment of dividends from a corporation

Beware the tax nightmare disguised as a gift - Globe and Mail

Can the CRA Pursue The Beneficiary of Your Life Insurance Under Section 160 of the Income Tax Act?  from Resources

Real Estate Sales - Are They Taxable?  What About My Principal Residence?

Principal Residence Exemption

Non-taxable income

Revised: November 30, 2022


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