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Joint accounts
November 9, 2022
9:07 am
hwyc
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I am following the posts in this thread regarding joint account income reporting, thought it can be a thread of its own.

There is one line on the Navigator article in the Conclusion that strikes me.

You also cannot choose a ratio to report on your respective tax returns each year to optimize your tax savings.

I had one TDDI brokerage joint spousal account meant for joint-with-right-of-survivorship (JWROS). My spouse never contributes. In the above context, I always stick with reporting 100% of everything (T3,T5,T5008) inside this account, every year to my income tax.

What happens if this year my spouse gave me a lump sum to buy GIC under the joint account. Will income attribution be allowed & sufficient for tax filing a single GIC? Or just keep calm & carry on with 100%

November 9, 2022
10:29 am
Loonie
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If a new purchase triggers an additional T form, then you can treat that one according to contributions made to it, just as you have the other ones. This is my opinion only. i'm not a lawyer or accountant.
I think that what they are trying to prevent is people who try to adjust the ratio on the same investment every year in order to make their income come out where they want it.

November 9, 2022
11:34 am
AltaRed
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Attribution of income is always based on whose capital it is that funded the investment. It is a matter of fact, not choice, who reports how much income on their individual tax returns.

If you have the documentation to prove (to CRA if they query) your spouse provided the capital to fund a GIC in a joint account, then your spouse can claim the interest income received on that particular investment.

Record keeping of ownership of individual assets within a joint (JTWROS) investment account for taxation purposes. We avoided that kind of record keeping for decades by having 2 such JTWROS accounts... one with Spouse 1 named first (and funded only by Spouse 1) and the other one with Spouse 2 named first (and funded only by Spouse 2). That way the tax slips are always 100% to Spouse 1 in the former instance and 100% to Spouse 2 in the latter instance.

November 9, 2022
5:51 pm
Denise
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I always do 50 50. I do my own taxes using a software program.
I do income splitting.
Do your taxes the way you have been. Then redo 50 50 and I bet you will see the tax man get the same amount.

November 9, 2022
6:26 pm
AltaRed
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It is not a question of what the taxman takes and whether or not the answer could be the same (by coincidence with both in the same marginal tax bracket as an example), it is how the Income Tax Act says it is to be done.

November 10, 2022
3:06 am
cgouimet
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AltaRed said
It is not a question of what the taxman takes and whether or not the answer could be the same (by coincidence with both in the same marginal tax bracket as an example), it is how the Income Tax Act says it is to be done.  

Just like school - gotta do it the right way ...

CGO
November 10, 2022
4:06 am
Bill
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I say just report it based on whose SIN is on the T5. Unless you're in different tax brackets and the amount of tax difference is material to you and you have no other way (e.g. pension income splitting) of getting in the same tax bracket.

My experience is CRA agents don't know or care about the Act, they just want the reporter of the income to be the same as the SIN and everybody's happy, back to sleep. Plus I've never heard of anyone being questioned about who sourced the funds in a joint account or about income attribution, even on this site. The amounts involved in the average joe/josephine's joint accounts seem not of interest to them. Not saying they don't have some unit investigating attribution among ultra-wealthy folks who shift large amounts of income to kids, etc, they might, but I even doubt that. My attitude, at this age, is if enforcer doesn't care then neither do I, do what's easiest & keeps everybody/computer happy (again, assuming it's not material to me).

November 10, 2022
4:55 am
dougjp
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Bill said
I say just report it based on whose SIN is on the T5. Unless you're in different tax brackets and the amount of tax difference is material to you and you have no other way (e.g. pension income splitting) of getting in the same tax bracket.

My experience is CRA agents don't know or care about the Act, they just want the reporter of the income to be the same as the SIN and everybody's happy, back to sleep. Plus I've never heard of anyone being questioned about who sourced the funds in a joint account or about income attribution, even on this site. The amounts involved in the average joe/josephine's joint accounts seem not of interest to them. Not saying they don't have some unit investigating attribution among ultra-wealthy folks who shift large amounts of income to kids, etc, they might, but I even doubt that. My attitude, at this age, is if enforcer doesn't care then neither do I, do what's easiest & keeps everybody/computer happy (again, assuming it's not material to me).  

Same approach that I take about declaring tax. I know this is diverting the topic, however instead of starting a new thread, a simple question - can't 'shifting' (large or any) amounts to kids be done by simply gifting the money, which is tax free up to some large amount (can't remember)?

The badness of a movie is directly proportional to the number of
helicopters in it.

November 10, 2022
6:16 am
mustang
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Bill said
I say just report it based on whose SIN is on the T5. Unless you're in different tax brackets and the amount of tax difference is material to you and you have no other way (e.g. pension income splitting) of getting in the same tax bracket.

What he said!

November 10, 2022
6:24 am
Winnie
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dougjp said
Same approach that I take about declaring tax. I know this is diverting the topic, however instead of starting a new thread, a simple question - can't 'shifting' (large or any) amounts to kids be done by simply gifting the money, which is tax free up to some large amount (can't remember)?  

There is no "gift tax" in Canada.
Any resident of Canada who receives a gift or inheritance of any amount, except from an employer, or as a tip or gratuity due to their employment, will not have to include this in their income.

You can gift as much money as you want without being taxed.
In Canada, there's no limit on how much you can gift someone.

November 10, 2022
7:01 am
hwyc
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No tax on the recipient. But there may be tax triggered on the giver depending what is gifted, right?

… ok …we are talking about cash.

November 10, 2022
7:09 am
AltaRed
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hwyc said
No tax on the recipient. But there may be tax triggered on the giver depending what is gifted, right?  

There are no (gift) tax consequences on any gift to an adult, other than one's spouse or minor child. That doesn't mean there is no capital gain tax consequence on a capital item like stock or bonds or expensive painting or real estate that has been (deemed disposed of and) signed over to a recipient, but that is not a gift tax.

November 10, 2022
7:35 am
AltaRed
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Bill said
I say just report it based on whose SIN is on the T5. Unless you're in different tax brackets and the amount of tax difference is material to you and you have no other way (e.g. pension income splitting) of getting in the same tax bracket.

My experience is CRA agents don't know or care about the Act, they just want the reporter of the income to be the same as the SIN and everybody's happy, back to sleep. Plus I've never heard of anyone being questioned about who sourced the funds in a joint account or about income attribution, even on this site. The amounts involved in the average joe/josephine's joint accounts seem not of interest to them. Not saying they don't have some unit investigating attribution among ultra-wealthy folks who shift large amounts of income to kids, etc, they might, but I even doubt that. My attitude, at this age, is if enforcer doesn't care then neither do I, do what's easiest & keeps everybody/computer happy (again, assuming it's not material to me).  

It is one thing to say that one does not have knowledge of anyone being desk audited by CRA to provide documentation supporting attribution of income on tax returns, and that one personally has never been caught in CRA's net as regards proper attribution of income on investments, but it seems to me to be terrible advice to suggest someone they should not care much about potentially breaking the law with inappropriate income splitting, and/or attribution of income.

For the most part, our tax system is based on the honor system, and it is both cost effective and cost efficient to do so, but tax evasion is in fact illegal and is taken seriously by CRA when it is discovered, as it should be. Example analogy: In the corporation that I worked for, reporting of expense accounts was based on the honor system but we were required to retain the documentation supporting expense reports. If spot audits found cheating, the employee was automatically terminated. That is how honor systems work.

November 10, 2022
7:45 am
RetirEd
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Hmm.. In the past, I learned that gifts of money to another individual are tax-free only to $10K per year - after that the recipient had to count it as income. In neither case does the donor get a tax break.

I learned this back around 2002, when someone gave me a few bucks and I checked to see what would happen to my taxes. Anyone aware of any changes in that rule in the 20 years since? And does it make a difference if the donor and recipient are related, or if one is an heir of the other?
RetirEd

November 10, 2022
8:38 am
AltaRed
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As I mentioned, there is no gift tax in Canada to anyone other than a spouse or a minor child. https://www.taxtips.ca/personaltax/when-are-gifts-and-inheritances-taxable.htm
and any other of the dozens of Google links.

November 10, 2022
8:46 am
Norman1
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There's no gift taxes in the Canadian tax system. The attribution rules are for any income generated by the gifts to spouse or minor child.

Those $10,000 exclusions (now around $17,000) on gifts subject to gift taxes are from the US tax system. They only apply to people in Canada who are also subject to the US tax system.

One also needs to keep in mind that having to report a gift in the US doesn't mean one is taxed on that gift. IRS: Large Gifts or Bequests from Foreign Persons describes reporting requirements for people who receive gifts from a foreign person. It is just a reporting requirement.

November 10, 2022
9:12 am
hwyc
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... thanks everyone. Think I have not done anything regrettable yet. I also have enough information to navigate forward.

November 10, 2022
5:33 pm
Bill
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AltaRed, as you read in my other posts it was CRA's agents who incorrectly told me that I/we should not have attributed, I/we should have reported based on T5 SIN, that was the basis of their initial reassessment, i.e. not only were they indifferent to the law they were urging me to break it to resolve the matter, it was me who told them I'd be happy to see them in court to uphold the law and it was then that they subsequently reversed to the lawful position. So it is my personal experience that has informed my practical approach going forward, we'll just have to agree to disagree re. how much obedience/respect is owed enforcers who urge one to break the law.

November 10, 2022
8:33 pm
AltaRed
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You might be forgetting CRA agents are assuming the correct owner of the capital is the one named as the owner of the investment in the first place....which then makes using the SIN number attached to the T3 or T5 or T5008 the correct one, or apportioned appropriately as all CRA approved tax software has provisions for. Indeed, the option to allocate tax slips is front and center of all tax software I am familiar with.

A CRA agent would not assume a taxpayer would take their own capital and illegally invest it in their spouse's name in the first place (spousal registered accounts and documented spousal loans excepted). So Bill, your assumptions are not necessarily correct and it is thus a bit outrageous to conclude "the enforcers are urging the taxpayer to break the law". Rather, it is more likely a case of there being plenty of anecdotal evidence on financial forums of people either being ignorant of tax law or playing footloose and fancy free of tax law.

You obviously can do as you wish for yourself but I think it is a disservice in a financial forum to recommend/opine/suggest taxpayers do not follow the ITA. I suspect we will continue to disagree on this matter.

Please write your comments in the forum.