|Posted on 30 June, 2014 at 3:10|
Gift tax issue
In general saying, there is no gift tax in Canada. If you give the gift of cash, as per Revenue Canada Agency Miscellaneous Receipts NO: IT-334R2 section 4. Amounts received as gifts, which is, voluntary transfers of real or personal property without consideration, are not subject to tax in the hands of the recipient. Therefore gift of cash has no tax implications except that if the gift is made to your spouse, or to a child who is a minor, the "attribution rules" may have the effect of causing you to be taxed on the income earned on the gift.
Attribution rules apply to several situations, including:
• Income and losses from property transferred to a spouse or minor family member
• Capital gains/losses realized on property transferred to a spouse
• Transfers of property to a trust.
Note that in tax terms "transfer" has a broad definition that covers just about any way ownership of a property is moved from one person to another. A transfer includes both a gift and a sale.
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It sounds restrictive, but there still can create some tax benefits for you when you make gifts to your family members. For example, you could make a gift of your home and if it was your principal residence for each year you owned it, the transfer will be tax-exempt. To qualify as a principal residence you, your spouse or child must have ordinarily inhabited it.
You also could transfer a non-principal residence, such as a cottage or a rental dwelling, to an adult child and it could qualify as the child's principal residence if the child occupied it. You would be liable for any accrued gain up to the time of transfer, but if the home remained your child's principal residence, there would be no further taxable gain for the child.
You are strong encouraged to consult or engage with your accountant and estate lawyer before you come up with your decision of money or property transferring.