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R. Klein, EA
R. Klein, EA, Accountant
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Further to my previous correspondence regarding the financing

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Further to my previous correspondence regarding the financing of my daughter's (age 26) 3 year postgraduate course, another possible source of funding occurs to mind:-

I own a property, held as 'joint tenants' with my wife, which could be rented out.

Is there any way I could assign the rental income to my daughter for the purpose of her education, thus taking advantage of her personal allowance and lower rate band as compared to my own 40% straight off the top level
Submitted: 1 year ago.
Category: Finance
Expert:  R. Klein, EA replied 1 year ago.
Thanks for your question.
No, this would violate one of the basic tenets of tax theory and tax law.

You cannot assign income to another person for the purpose of paying less tax. Your daughter would need to own the property for this to happen or the property would need to be owned by a company which in turn is owned by your daughter.

The theory is simple. Imagine if you will that you don't want to pay ANY tax. If the law allowed such an assignment of rents, you could theoretically assign the rents and the rest of your income to me and I should have to pay the tax, even though you earned the money from working. It just does not work that way in any country.

Taxes must be paid on the income earned by the taxpayer/worker/owner of the asset.


Customer: replied 1 year ago.

Thanks,


 


I was thinking in terms of whether some form of Trust could be established. I appreciate that Trust law is a complex field with numerous pitfalls, but I was just wondering if, in principle, such a structure was possible?

Expert:  R. Klein, EA replied 1 year ago.

Trust issues can be very complex, from both a legal and taxation standpoint. One of the issues is A) how to get property INTO the trust and B) how to get property OUT of the trust.

 

The costs to set up and manage a trust may be greater than the tax savings realised, depending on the situation. Rarely is a trust justifiable by tax savings as the sole reason for establishing such a legal scheme.

R. Klein, EA, Accountant
Category: Finance
Satisfied Customers: 2882
Experience: Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
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