I was having lunch with a good friend of mine and she mentioned there were some stocks that a 91 year old lady wanted to sell and then split it amongst her 4 children.
Well of course you can sell your share, but then she is stuck with paying Capital Gains, because she will need to claim the income (growth/profits of the stock).
So this is how this works:
As of 2018, the capital gains inclusion rate is 50%For example, with a capital gains inclusion rate is 50%, if you bought shares for $10,000 and sold them for $15,000, you have to declare a $5,000 capital gain in the year you sold the shares
Can you gift stocks and property to family members in Canada and avoid capital gains all together. Not in Canada
Are Gifts or Inheritances Taxable?
There is no “gift tax” in Canada. Any resident of Canada who receives a gift or inheritance of any amount from almost any source (except from an employer) will not have to include this in their income. However, if capital property (e.g. real estate, 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 (FMV), and will have to pay tax on any resulting capital gain. The FMV is deemed to be the “cost” to the person to whom the shares were given. If money or capital property is given or loaned to a spouse or a related minor child, attribution rules will apply.
As pointed out by the Video Tax News team in the April 2019 Life In The Tax Lane video, there could be a problem if capital property is sold to a non-arms-length person for less than FMV. Subsection 69(1) of the Income Tax Act deems the proceeds to be at FMV when a taxpayer has disposed of a property non-arm’s-length for no proceeds or for proceeds less than FMV. However, it only deems the acquisition cost to be at FMV if the property has been acquired at a cost higher than FMV, or by way of gift, bequest or inheritance. It does not deem the cost to be at FMV where the cost is less than FMV. This may result in the selling taxpayer to have deemed proceeds of FMV while the acquiring taxpayer must use the actual transaction amount as their cost.
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