Q: My wife recently retired and is now in the bottom tax bracket. Are there restrictions on me cashing out my non-registered assets (paying applicable taxes) and giving her that money to invest, since she’ll pay lower taxes on the capital gains and dividends?
—Jeff Wickens, Calgary
A: When you’ve been married a long time it can be hard to remember what is yours and what is your spouse’s. This probably isn’t an issue most of the time, except when it comes to iPads and income tax. You care that your iPad is yours when you want to use it. And the Canada Revenue Agency cares that your income is yours, even when you don’t want it to be.
The CRA’s “attribution rules” are at the heart of your question. Allan Schieman is the founder of Defend Your Wealth, an independent financial research and education company in Calgary. “You can give your spouse any assets you want,” he says, “but the income those assets generate will attribute to you.” In other words, you’ll pay the tax, not her.
A better option is to loan cash or a portfolio of stocks to your spouse and charge her the CRA’s prescribed rate of interest (1% these days). You report that interest income on your tax return, but the income from the portfolio will be taxed in her hands.
I’d consult an accountant for advice specific to your circumstances, and be sure to keep good records in case the CRA comes calling. You could even keep those records on your iPad. Your iPad.
Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal question? Write to Bruce at [email protected].