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Answered in 4 minutes by:
2/4/2013
AskMe, Research Analyst
Category: General
Satisfied Customers: 32,761
Experience: Lifelong learner and trivia hobbyist
VerifiedTax Robin :
Hello and thank you for using Just Answer
There is no "gift tax" in Canada. Any resident of Canada who receives a gift or inheritance of any amount from almost source (except from an employer) will not have to include this in their income.
If income-producing property, or money which is used to purchase income-producing property, is transferred or loaned to a related minor, either directly or indirectly, or by means of a trust, the income from the property will normally be attributed back to the person giving the gift or loan. If your son is 18 or older you do not have to report the rental income as your own should he use the money to purchase a property and use it or a portion of it for rental.
Tax Robin :
Can you see the posted answer?
Customer:
Hi, thank you very much for your answer. I do have more general question but not sure if it qualifies as follow up or new payment is required.
Customer:
Should I go ahead and ask?
Tax Robin :
Go ahead
Tax Robin :
Please ask your question, here
Customer:
What is the most advantegous tax setup for us in the situation that we want to invest in rental property for the duration of our son's university (he is 18+). he will leave in the house with 5 of his friend (fully licenced rental property for that purpose). We have enough funds on our LOC linked with our primary residence. We are high income earners in higest tax bracket.
Customer:
to give him a gift or to be co-owners of the property?
Tax Robin :
If you wanted to invest then you should buy the property and not just give him the money to do so. If you want hime to be a co-owner then having him pay for half would be needed. If you just give him the half then you are going to need to report the gift as if you sold half. You would not want to offer services to the renters as this would then deem it a business.
Tax Robin :
Just because you would be co-owners does not mean it has to be a partnership and the rental could still be as non-business.
Customer:
I do not understand what means '...to report the gift as if you sold half'?
Customer:
he has no income, all money will come from us. if we report the net income from property it would be taxed as our income, correct?
Tax Robin :
If you make an outright gift of the property to your family member, the family member's cost is "bumped" up to the fair market value (FMV). If capital property (real estate, other than a principal residence, or investments) is given as a gift, the person who has given the gift will be deemed to have sold the capital property at fair market value, and will have to pay tax on any resulting capital gain. As you would be buying and giving the gain would not be there (property does not rise that quickly).
Tax Robin :
You would be splitting the rental income with your son. In proportion to your ownership interests.
Customer:
ok. thank you very much.
Tax Robin :
I know it may all seem like a lot to go over. I would suggest speaking with your personal =tax av=dviser too.
Tax Robin :
Your positive rating is always thanks enough.
If you could also participate in the very short survey that Just Answer will send you by e-mail I would appreciate that very much.
AskMe, Research Analyst
Category: General
Satisfied Customers: 32,761
Experience: Lifelong learner and trivia hobbyist
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