How are jointly held investment accounts taxed? - MoneySense

How are jointly held investment accounts taxed?

Joint ownership makes access to the investments easier by a surviving spouse, but requires diligent record-keeping while you’re both alive.

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Q. My wife and I have a non-registered joint investment account at a discount brokerage. My wife also has a non-registered individual account at the same brokerage. We have been advised by a lawyer to make our accounts joint to avoid probate when one of us dies. I understand that adding my name to my wife’s separate account would not incur any immediate capital gains tax implications.

Would the brokerage identify any dividends, etc., in her account as hers alone once it is jointly owned, or simply have both our names on the tax slips, and leave it up to her to identify the attribution? My wife is in a lower tax bracket. Additionally, would it be preferable to merge both accounts into one single joint account or keep the two accounts separate but both jointly owned?
–Peter

A. From Canada Revenue Agency’s (CRA) point of view, the taxation of jointly held investments is simple—taxes are paid on the investment according to the original contribution ratio to the investment. In your case, you can make all your accounts joint, but your wife’s non-registered investments should still be taxed 100% as her income.

The brokerage will show both your names on the slip but, for tax purposes, you would enter all the income from the investment on your wife’s tax return. You will need to maintain records that show she contributed to the investments in the event of a query from the CRA. If she should pre-decease you, the investments will automatically become yours; and on your death, there will be a capital gain based on the market value of the investment at the time of your death minus the original cost to your wife. Again, detailed records of the purchase—including date of purchase, name of the equity, quantity of shares or units purchased, and the unit cost—as well as any additions to the investment need to be maintained to calculate this.

Your last question as to whether to merge the accounts into a single joint account, or maintain two separate jointly-owned accounts is really up to you and how good your record-keeping is. From my experience, keeping these kinds of records can be onerous and so it might be more convenient to keep the investments separate.

Theresa Morley, CAP, CA is a partner with Morley Chartered Accountants in Barrie, Ont. She blogs at MorleyCPA.


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