ATTRIBUTION RULES 74.1 - international non-resident cross border income tax help estate family trust assistance expert prep

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david ingram replies:

If your husband gave you $1,000 and you put in a drawer for twenty years and then took it out and put it in the Bank of Montreal and the B O M paid you $22.50 interest, the interest is taxable to your husband.

However, the next year, when you receive interest on the $22.50 interest, the interest paid on the interest is taxable to you .

Therefore, as time goes by, more and more of interest on the interest becomes taxable to you.

This also applies if you were not married when your husband gave you the money as the act clearly says "to a spouse or a person who has since become a spouse". In 43 years, I have only seen this application applied once in the case of a dentist who gave his receptionist some money and then married her ten years later after his wife died.
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CRA taxed the dentist on income his new wife was receiving from his original gift.
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David Ingram <[email protected]> wrote:

xxxx wrote:

Hi David,

 

I greatly appreciate being on your e-mail list.  One question following the e-mail below:

Can a person give their spouse a gift of cash, and is that gift taxable?

 

Is there anything on the CRA web page to read about gifts between spouses from the tax point of view? (cash, property, stocks)   I've tried to find something, but all I got was about gifts to charities and organizations.

 

Thank you

xxxx

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david ingram replies:

There is no gift tax in Caanda.  However, under sections 74 and 75 of the Candian Income Tax Act, if a spouse gives a spouse any property which creates an income (or a loss), the profit or loss as the case may be is the profit or loss of the transferer (the giver) not the transferee (the recipient)  These are called the ATTRIBUTION RULES and these attributioon rules were what was explained in the question below.

US / Canada Income Tax Help - CEN-TAPEDE <[email protected]> wrote:

QUESTION:

My wife and I have a joint investment account for about 7 years and have our own individual investment accounts for different length of time(3years for her,2 years for me).    1. For the last 7 years I have declared all the capital gains and investment income of our joint account and my individual account on my income tax return which is pure ignorance and to
 our disadvantage even though the the total amount was not large.     2. Now we want to declare 50%/50% of our capital gain and investment income of our joint account because the amount is becoming quite significant.        3. Can we just ignore the past and start to do this now?Do we need to explain to CRA?Do I need to attach all the T5 and T3 slips on both of our returns?(Then we would have no copies of our own.)        We thank you very much for the help!    Regards.   _________________________________________________________  david ingram   replies:      1.   Under Section 74.1 of the Canadian Income Tax Act, The account is taxable to the spouse who put the money into the account.  Therefore, If you gave her $10,000 and she puts it into an account in her name, any earnings in that account on the first $10,000 is taxable to YOU forever.  The earnings on the earnings are taxable to her however.    Therefore, if you put the money into the joint account
 seven years ago, any earnings on the original amount or any further amounts you put in are correctly taxable to you.  These are called the  'Attribution Rules'.    But, if the earnings were left in the plan, 1/2 of the earnings on the earnings would be taxable to her.    On the other hand, if the joint account was an inheritance from her father and was put into a joint account, the reverse would be true and everything on the original amount would be taxable to her with 1/2 of the earnings on the earnings taxable to   you.    The same is true of the individual accounts you have.    Your question is really based upon, 'what happens if you suddenly switched'?  The answer is that in 43 years in this business with 155 offices of my own in 5 provinces and the management of H & R Block offices before that in three provinces, I have only seen the tax office go after two couples under the attribution rules.  And that involves the preparation of well over
 3,000,000 tax returns over .    The ONLY ones I saw were H & R Block clients in Saskatchewan.  One was in Kipling Saskatchewan and the other in Weyburn Saskatchewan and I won both by tracing  minor amounts of money that the wives had earned and saved during World War II as being justification for the husbands splitting the proceeds from the family farms which were sold 30 years later.  The farms, of course, were only in the Husband's names under the VLA (Veteran's Land Act) rules but it was the   $1,000 or $1,500  that the wives had saved which was used to get the farms going.    In your case, it may be that if you gave your wife the money, you were just paying her back while she supported you through electrical engineering.     In truth, you need to do a spread sheet and figure out what is what 'just in case'.    It may be that the split should be 38% <> 62% or 20% <> 80% or 49% <> 51% but you can certainly make the switch
 without much worry about being questioned by the CRA, particularly since Stephen Harper's government is clearly on track for a joint tax return sometime in the future.  _____________________________________________      

david ingram wrote:

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David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
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4466 Prospect Road
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Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office)

 

email to [email protected]
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Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."

 

Be ALERT,  the world needs more "lerts"

 

David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.

 

Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.

 

This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.

 

$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.

 

$1,000 would be the same with one rental

 

$1,200 would be the same with one business no rental

 

$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.

 

$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,600 would be for two people with income from two countries

$2,800 would be all of the above and you moved in and out of the country.

 

This is just a guideline for US / Canadian returns

 

We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.

 

With a Rental for $350

 

A Business for $350 - Rental and business likely $450

And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.

 

Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.

 

TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.

 

8891 forms are generally $50.00 to $100.00 each.

 

18 RRSPs would be $900.00 - (maybe amalgamate a couple)

 

Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

 

Just a guideline not etched in stone. 

 

This from "ask an income trusts tax and immigration expert" from www.centa.com or www.jurock.com or www.featureweb.com. David Ingram deals on a daily basis with expatriate tax returns with multi jurisdictional cross and trans border expatriate problems  for the United States, Canada, Mexico, Great Britain, United Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France, Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas, San Antonio Houston, Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax  Immigration Wizard Antarctica Rwanda Guru  Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist expert preparer expatriate anti money laundering money seasoning FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income Tax Convention

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