Canadian Money Forum banner

1 - 6 of 6 Posts

·
Registered
Joined
·
7 Posts
Discussion Starter #1
I had a quick question and was hoping for some guidance.

My sister has received a cash gift (~8K) from her father-in-law. Think of it as a belated baby shower gift. Father-in-law lives in Asia (not a Canadian Citizen / Resident) and hand carried the cash to Canada during his visit. My sister is obviously very thankful & I have talked her into investing the amount (vs. spending it). However, she was asking me about tax implications. She is a homemaker and has no other income.

Questions:

1. Please confirm that I am correct in my understanding that my sister owes no tax to CRA.

2. Given that my sister has no income, if she invests this amount, she only pays tax on any capital gains / dividends, right?

3. What steps should my sister take, if any, to proactively address any future CRA concerns in case they wonder about source of funds? My sister's partner is worried that the CRA would attribute the income to him since my sister has no source of income. He is the sole income earner in that household. They have done nothing wrong but don't want to get caught up in any CRA audit or anything like that. Is there a letter or something similar they should send to CRA proactively to declare the gift?

Would particularly appreciate suggestions / guidance on question # 3

Thanks a lot.
 

·
Registered
Joined
·
7 Posts
Discussion Starter #2
I should also clarify that she has no room left in any registered account and therefore, this amount would have to be invested in a non-registered account. Thanks a lot.
 

·
Registered
Joined
·
10,517 Posts
Gifts are not taxable ... though large gifts can be questioned by CRA. The tax book I had years ago recommended getting the gift giver to write a letter spelling out the amount and that it is a gift. I am not sure CRA would question it but having documentation typically helps.

Other income or no other income ... as the gift is not taxable, only money made from the gift would be taxable (i.e. CG and dividends or other income if invested in a taxable account or interest if in a savings account/GIC).


Personally, I'd ask her if she has $8K of TFSA contribution room as Canadian tax free is likely better for her.

Edit: It seems you have answered the TFSA question.

The bigger picture might change this but don't forget to point out to her that she will have another $5.5K of TFSA contribution room granted in Jan 2018 so maybe some of what is invested can be transferred. Any gains/income will still be taxed but over time, the full $8K should be able to be transferred. The risk is that the value grows, it is at a higher value when put into the TFSA then drops.

Note as well that shares can be transferred to the TFSA (i.e. no need to sell the shares then contribute the cash to the TFSA ... unless one feels the stock is not worth holding anymore or has become too risky).
http://www.taxtips.ca/personaltax/investing/transfersharestorrsp.htm


Cheers
 

·
Registered
Joined
·
7 Posts
Discussion Starter #4
Like the suggestion about getting a letter. She mentioned that she may get a couple of other cash gifts in the future. So, probably a good idea to document all of them.

Also, she has no registered room left, so these amounts have to be invested in a non-registered account.

Thanks a lot.
 

·
Registered
Joined
·
10,517 Posts
From what I recall of the tax book's example, the issue was that the gift giver died before CRA started asking questions so it became a "he said, she said" situation instead of "call them up, they will confirm the gift".

As the giver is in Asia, even if they are accessible - having documentation in Canada that can easily be sent IMO would save enough time/hassle to be worthwhile.


Cheers


PS

I don't recall the book mentioning it but if the gifts are going to happen several times, then if there is an event or situation they are tied to, I suspect including the event/situation in the letter would also help. If the letters mention "shower gift" then "birthday gift" then whatever else ... IMO, it would help underline the ordinary nature of the times the gift was given.


Cheers
 

·
Registered
Joined
·
3,105 Posts
I agree with Eclectic. A letter is a good idea. It probably won't be necessary (8K is peanuts in the eyes of CRA) but it doesn't hurt.

Also, because it's only 8K, any dividends/capital gains from it most likely won't be taxable either if she really has no other income. The personal exemption is around 11K so any income below that threshold won't be taxable.
 
1 - 6 of 6 Posts
Top