However, there may or may not be other tax implications. Therefore, I will outline the situation of taxes that may be caused by children who earned from donations or income from gifts.
When will the tendency to be considered apply?
If you transfer assets to children, this will usually result in being considered a disposal. This means that when you transfer stocks, real estate or stocks of a private company, it is like you sell these assets at fair market value.
This considered character applies to your life and death. When you die, you are deemed to be disposing of your assets. Only the remaining assets can extend taxes. The assets inherited by your child may be taxed before your estate is allocated.
However, unlike capital assets, cash does not appreciate value. Therefore, there is no disposal that is considered cash and there is no tax unless cash is withdrawn from a tax-granted account, such as a registered retirement savings plan (RRSP) or a corporate bank account. In this case, withdrawal can be considered as parental taxable income.
Canadian Income Tax Guide
Deadline, tax reminder, etc.
Income Attribution Rules
When you donate cash to your adult children, all income and capital gains earned from that money are taxable.
When you provide cash to your minor children and invest in gifts, it may have tax implications for you. Capital gains should be taxed on children. But interest and dividend income are attributed to parents. Parents must also report this income on their tax returns, even if the account is the name of their minor child.
Tax impacts may also have if you lend cash to your adult children for investment purposes. If the loan does not hold interest rates, or the interest rate is below the Canadian Revenue Agency (CRA) stipulated interest rate, then when the loan is paid (currently, the stated interest rate is 4%) – is closely related to the parents. However, capital gains are always taxed on children.
The only way you can borrow money from your adult children without parental affiliation is to have a loan matched with the rates specified by the CRA at the time of the loan.
