Author Topic: CAD - Non-registered accounts- taxes and spouses  (Read 990 times)

Prairie Stash

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CAD - Non-registered accounts- taxes and spouses
« on: December 16, 2016, 08:31:37 AM »
So I'm confused when attribution rules come onto play and how to avoid paying extra. I'll write a scenario:

Me - no RRSP, TFSA room - extra savings (good problem) of $25K/year for the next 5 years
Spouse - low income, currently on mat leave (possibly SAHP in the near future)
2 kids - UCCB goes to spouse (assume $9,000/year) - I have a claw back on UCCB of 5.7% (every $1000 our household earns decreases benefits by $57, its tricky to predict accurately)

1) Can I loan money to my children (at the CRA 1%) and have them claim capital gains on their taxes? The principle could be paid back at age 15, the gains could be transferred back as sub-market rent (non-taxable to recipient), the rent is legal to charge but unusual. This would give them at least $10K in RRSP room when they turn 18.Is this legal or allowed at all? Putting gains in a minors hands seems like an awesome strategy, my 3 year old is on board.

2) My spouse uses the UCCB to invest in non-registered stocks. I top up her TFSA from my income. Is the $9000 loan free? I read that I can top up the spouses TFSA, tax free since there's no taxable gains the attribution isn't a loan.
3) I then loan/use $10-20k/year to her, who pays the dividends and capital gains? (ideally her in the lower tax bracket). I was thinking about harvesting capital gains periodically, not sure if that's smart or if its better to wait till retirement when it competes with RRSP income.

Its the attribution rules that are tripping me up. I don't want a tax bill 4 years later with interest accrued and taxes payable by me (higher income).
« Last Edit: December 16, 2016, 08:37:00 AM by Prairie Stash »

Prairie Stash

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Re: CAD - Non-registered accounts- taxes and spouses
« Reply #1 on: December 16, 2016, 10:25:07 AM »
Doing some research, I think I discovered a tax strategy for some of the money.

UCCB payments have special tax rules. I can invest the money from the UCCB into a trust for my children that is 100% taxed in their hands (no tax). There's no rules about withdrawals, unlike an RESP. Theoretically I can charge my minor children rent (non-taxable if its below Fair Market Value), which is all tax free in my hands.

So a parent can invest that money for 15 years, start charging rent at age 10 (or whatever age they feel appropriate) and drain the account into the household revenue. I'll use my income to fund the RESP - paper trail is important! Thus the children will still have money for school and I'll have money for retirement. This is an alternative to the popular ideaof using the UCCB to fund an RESP. 

I can hear the howls of outrage, please note my children's education fund is already receiving funding to cover University. This is entirely motivated to reduce taxes as a household. We're already taxed on the UCCB payments, I don't want to be taxed again on the investments made. Its just an accounting paper trail that looks legal to me, I'm looking for feedback on legality.

 

Wow, a phone plan for fifteen bucks!