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.
2
Q
These methods are the most common methods used to split income: (4)
A
- payment of personal living expenses by higher income spouse
- spousal RRSPs
- contributions to surviving spouse’s RRSP by estate
- registered education savings plan (RESPs)
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.
4
Q
capital gains realized by a minor on property transferred are attributed to
A
the minor
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
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
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.)