Transfers

Question 1

Attribution Rules

Answer 1

• There is no attribution of business income. Income attribution rules only apply to income from property.
• Attribution as a result of loan guarantees would only apply if the loan was not at commercial rates.

Question 2

Purchasing an accrued interest bond

Answer 2

• Transferor must include, in income, interest accrued up to the date of the transfer. The amount included in income is excluded from the proceeds of a debt obligation.
• Transferee must include interest from the date of the transfer.

Question 3

Avoiding Income Attribution on Transferred Property

Answer 3

Subsection 74.5(1)

1. Fair market value consideration must be received by the vendor.
2. If part of the consideration is debt, then interest must be charged at the prescribed rate and always paid by January 30th.
3. If it is a transfer to a spouse or common-law partner, then they must elect out of the spousal rollover in subsection 73(1).

• Subsection 74.5(3)*
  1. If the spouses or common-law partners are living separate and apart by reason of the breakdown of their relationship. (This exception applies to property income, but not capital gains, unless an election has been made.)

Question 4

Summary

Attribution of Income From Property

Answer 4

Recipient: spouse, common-law partner, non-arm’s length minors, nieces, or nephews:

Transfer by gift:

• income or loss from property attributed to transferor

Transfer by sale

• if not at FMV, income or loss from property attributed to transferor

Transfer by loan:

• if no interest at commercial rate, income or loss from property attributed to transferor

Recipient: Other non-arm’s length indivdual over the age of 18:

Transfer by gift or sale

• no attribution

Transfer by loan

• if one of the main reasons for the loan was to reduce or avoid tax and market rate of interest not paid, income only from property attributed to transferor.