Wednesday, February 4, 2015

Income Tax Attribution Rules

Paper presented at Tax Fundamentals for the Estate Practitioner (Vancouver, BC)
Continuing Legal Education Society of British Columbia

The federal Income Tax Act includes a series of rules that can attribute income earned by one taxpayer to another taxpayer. These are commonly referred to as “attribution rules”. These rules attempt to prevent a high-income earner from diverting income to a person who pays a lower rate of tax. This paper discusses those rules and how to avoid their application.

Specific topics include the following.

  1. Transfers and loans between spouses.
  2. Transfers and loans to minor children.
  3. Loans to grown-up children and non-arm’s-length adults (other than spouses).
  4. A trust in which the trustmaker reserves too much power or has an ability to get the property back (often called reversionary trusts).
  5. Attribution rules that can apply in the context of a corporate reorganization, such as an estate freeze.
  6. Attribution that can arise if a trust claims the principal residence exemption on real estate held by the trust.
Read the article >

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The above article provides general commentary of an educational nature. It does not constitute advice for any specific person or any specific set of circumstances. Because circumstances vary, readers should consult professional advisers in order to obtain advice that is applicable to their specific circumstances.