By Matthew Ardrey
Special to the Financial Independence Hub
With the recent changes in tax legislation at the federal level, married or common-law couples may now find there is a greater disparity in their marginal tax rates than ever before.
As both members of the relationship must file their taxes separately, it makes sense, where allowed, to place taxable investment income into the hands — and onto the tax return — of the lower-income spouse.
Unfortunately, straightforward gifts of investment property, typically cash or securities in-kind, will not accomplish this objective, as they invoke the income attribution rules.
The attribution rules state, that if one spouse gifts to the other for the purpose of investing, then all of the income and capital gains earned by the recipient spouse will be taxed in the hands of the gifting spouse. Essentially the attribution rules would eliminate any tax benefit available from the gift.
Conditions for loans that avoid attribution rules