Q: My German mother-in-law, 93, has built up a respectable nest egg and she wants to transfer some of this wealth to my wife here in Canada. Would it be better to receive the money as a living gift or as an inheritance?
—Nadir Harjee, Richmond Hill, Ont.
A: Gifts of property, stocks or funds from non-residents of Canada are not taxed, says Deloitte partner Lorn Kutner; whether it comes in the form of a living gift or an inheritance has no bearing. In fact, that income doesn’t even get reported. Of course, you must report any income earned on those investments, but any gains or losses would be measured against the fair market value of those assets when you received them. But Kutner warns there may be tax implications for the giftor in the other country, which may warrant separate tax advice.
Even though you don’t report the gift to the Canada Revenue Agency, Kutner encourages you to keep good records of the gift. If the CRA sees a significant jump in investment income they may do an audit. “There is a minimal chance the CRA would question it,” he says. “But if you can’t prove it then you might be fighting an uphill battle.”