Ch 7 - Non-arm’s Length Transfers, Income Splitting and Attribution Rules Flashcards

1
Q

A transferring spouse may want to realize a capital gain in order to (3):

A
  • utilize the capital gains exemption;
  • utilize capital losses incurred in the current year or in the past;
  • realize a capital gain in a year when his or her marginal tax rate is low.
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2
Q

These methods are the most common methods used to split income: (4)

A
  1. payment of personal living expenses by higher income spouse
  2. spousal RRSPs
  3. contributions to surviving spouse’s RRSP by estate
  4. registered education savings plan (RESPs)
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3
Q

How to avoid the attribution rules, on a loan?

A

interest rate must be equal or higher to the lesser of the prevailing market rate or the CRA’s prescribed rate in effect when the loan is made.

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4
Q

capital gains realized by a minor on property transferred are attributed to

A

the minor

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5
Q

In order to avoid the attribution rules for a minor, the property must be (2)

A
  • sold to the minor at fair value
  • child must either pay fair market value cash or transfer other property of equal fair value
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6
Q

attribution rule for adult children or related adult (parent, brother, etc..)
1- gifts
2- cap gain or investment income

A
  • no income or capital gains attribution from gifts
  • investment income or capital gain is taxable to the transferee and not the transferor
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7
Q

Attribution rules mechanism ceases (5):

A
  • upon marriage breakdown
  • upon separation
  • upon death of transferor or transferee
  • upon non-residency of transferor;
  • the year of the 18th anniversary of the transferee (unless he or she is the spouse or if transfer consists of a low- or no-interest loan.)
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